Australian Economy and Home Loan Market

The Reserve Bank of Australia has been concerned about rising property prices but this has been brought about by a lack of supply, in Sydney and Melbourne especially, rather than that of an overheated economy.

Fixed interest rate changes influencing the home loan market.

In recent weeks (early June 2010) the home loan market has seen cuts made to fixed interest rate home loans by some lenders meaning that you can now obtain two and three year fixed interest rate home loans cheaper than you can a variable interest rate home loan.

While some of the big lenders have been cutting back their fixed interest rate home loans, others have risen theirs, thereby making the home loan market very confusing at the present time for the potential home buyer to negotiate.

The Commonwealth Banks executive general manager of retail products has observed fixed rate home loans in the home loan market gaining popularity. He said recently that the difference between variable and fixed interest rate home loans are very close now.

“It is a more attractive offer for customers,” he said.

Those home owners considering taking advantage of the changes taking place in the home loan market at the present time by changing to a fixed interest rate loan should keep in mind that these loans offer much less flexibility than a variable interest rate home loan and usually charge high exit fees for opting out early.

Home loan market interest rate influences.

Whatever occurs in the home loan market generally variable interest rate loans are primarily influenced by the decisions of the Reserve Bank. Fixed interest rate loans are not so strongly influenced in this manner, as their cost is also heavily influenced by investors who invest in the fixed interest rate wholesale market.

In the home loan market generally variable interest rate home loans remain on the whole cheaper than a fixed rate interest rate loan.

It is therefore imperative that you fully consider your own particular financial situation regarding the need to fix the interest rate on your own home loan before actually doing so.

It has been forecast that there are some changes coming to the home loan market in coming weeks being brought about by the formation of the National Consumer Credit Protection (NCCP) body. One of the biggest changes will effect the implementation of home loan exit fees.

New regulations being brought in with the formation of the NCCP will include legal requirements to ensure the home buyer is able to afford the home loan.

The determination if home loan exit fees are fair. A move that has the potential to bring the cost of exit fees down and make it easier to switch from home loan to home loan.

Property investment in the home loan market.

The home loan market also reflects the importance home buyers are placing on property investment in an effort to create wealth and this is quite possible and safe if your home loan is structured in the right way.

The first rule to follow in using the home loan market to create wealth is to ensure that you have the necessary capital available to you in the first instance.

It is in this area that equity in your own home becomes an important factor. You may well have spent many years paying off your mortgage and this has enabled you to access your equity in the property to your advantage, or fast rising house prices may have quickened the process for you. It doesn’t really matter as if your equity is sufficient you can use this to invest further.

Related Posts

• Housing Affordability in Australia vs the Rest of the World
• Top Mortgage Lenders in Australia for Your Local Area
  One of the components of any bank or lending institution is mortgages and home loans for residential and commercial purposes. Some lenders specialize in one or two areas of mortgages while others carry a wide variety of mortgages and home loans. When choosing a lender, it is important to sign on with the one that has a program that fits or can be tailored to your needs.
• Credit Unions Vs. Banks: What’s The Difference?
  There are many points on the credit unions vs. banks debate to understand. These relate to fees, costs, ownership and services to name a few. Let's take a closer look at which points you should know...
• Wayne Swan Tells Borrowers to Consider Building Societies and Credit Unions
  Building societies and credit unions are often overlooked when searching for an appropriate place to bank your money as well as for borrowing. Because of lower overheads and not having to produce profits for shareholders they can often offer you a much better deal as the Australian treasurer can attest to.
• Australia, Following The US In Mortgage Defaults
  The US economy is the biggest one in the entire world and its changes have always affected other countries as well and Australia is no exception. If you want to learn more about what effects will be likely to happen in the near future as well, make sure you read the following lines carefully.
• The Real Score On Australian Economy
  Even though the financial crisis has apparently reached an end, in reality things look a little different and the economical situation looks no better. In the next lines, you will be presented with a closer analysis of different aspects omnipresent nowadays in the economy of Australia, so make sure you read them in order to have a clearer idea over the entire situation.
• The Reserve Bank - It’s A Dirty Job but Somebody Has To Do It
  Economics is a subject that a large majority of us don’t really know all that much about. Here’s what you should know about the Reserve Bank and the job it has to do.
• The Burden Of Borrowing
  With the Reserve Bank constantly raising the interest rates applied to every financial account and with an economical situation that is getting worse and worse, it is easier for everyone to blame the ones that cannot defend themselves for transforming the ‘Australian dream’ into a real nightmare for some.
• Buying A Home - Is Now The Best Time For A Property Purchase?
  There’s so much talk about interest rates, home loans, and unemployment rates, how does one know whether to buy a home or not? Read this regarding property purchases to determine if the market is right for you to buy or not.
• Low Income Home Loans
  It is wise to make sure you are aware of your rights as regards low doc home loans, as well as low income loans, as many low income families are stuck in the rut of paying high rents for sub-standard accommodation simply because they are unaware of what help is available.
• Rise in New Home Loans
  Borrowers seeking a new home loan should go ahead and do so. The economy is sound and interest rates are unlikely to rise too much further in the short term. The secret is to not over-borrow. Borrow well within your means and you should be fine.
• Average Home Loan Values in Australia
  If you are wondering what an average home loan is then you should read this article and find out how your home loan stacks up.
• Units Are More Affordable & Can Have More Capital Growth Potential than Houses
  Capital growth is an important investment strategy and one which allows you to passively manage your investment while it grows in value. Therefore, find out more about why units are now outstripping houses for capital growth in your area.
• Australian Mortgage Demand Drops
  In recent times we have seen a decrease in the amount of mortgages that are given to people. Read this article and find out what areas have felt this decline the most and some possible reasons for this decline.
• Fact Sheet Changes to FHOB in 2009-10 budget (TAS)
  If you are looking at buying your first home in Tasmania then you should read this article and find out about the FHOB amounts and cut off dates.
• Cheaper to Buy Home in NSW
  If you are looking at buying your first home in NSW then read this article and find out how buying a home in NSW is becoming a bit easier.
• National Australia Bank Warns of Lending Bias
  A financial system that shows bias toward any sector can well create future problems when it gets to the point where adjustments are required. Australia appears to be heading in this direction now and we must learn from the American experience if we are to avoid a similar calamity happening here.
• ANZ First To Follow CBA and Raise Interest Rates
  ANZ has raised the official rate on all standard variable home loans by 39 basis points.
• How Will The Recent Interest Rates Rise Affect You And Your Home?
  There has been a furious reaction in light of the recent rate rise by the Reserve Bank, and more importantly the immediate reaction of one of the major 4 banks in the country. Who are they, what have they done, and how will the recent rise affect your finances?
• Decrease in Property Demands
  The first home buyer should benefit from the expectation that interest rates may not rise again as previously expected, the high Australian dollar plus the easing on inflationary pressures and an easing on rental demand will be a welcome sign that has been long coming.
• Government Cracks Down on Loan Exit Fees
  The government is set to crack down on loan exit fees. Read this article and find out how these new laws will be able to help you.
• The Australian Property Market's Last Decade in Review
  When you buy a house it is important to know how much you will expect to make from the property. For a review of the Australian property market’s last decade please read this article.
• Brisbane land values on the rise
  Most experts agree that if Brisbane is to keep its land values low enough to retain affordability it needs to be cheaper than Sydney and Melbourne. Growth is needed to keep jobs but growth will keep upward pressure on prices. Its a catch 22 situation.
• Guide to Mortgage & Finance Industry
  Read this article and find out all you need to know about borrowing by reading our guide to the mortgage and finance industry.
• Big Four Banks Making $1.33B Extra From Your Mortgage
  The big four banks make $1.33 billion dollars extra from your mortgage. Read this article to find out how you can save money on your home loan by possible avoiding the big four banks.
• Prepare for Rate Rise or Risk Needing a Second Job
  While interest rates are low now they may rise again and if they do will you be able to afford the repayments. Read this article to you can prepare for rate rise and avoid needing a second job.
• Don’t Get Caught Out With Interest Rates Increases
  While the interest rates rise and fall many providers may do it less than others. Read this article to find out how you can avoid being caught out with interest rate increases.
• Smooth Property Investing for Rough Times
  Investors can do well to utilize dollar cost averaging, the making of investments over several months to smooth investment returns, as well as risk diversification. In this way you can lighten off some of your portfolio investments in the good times and top up a little when the gray clouds gather.
• Rising Rates will cost Households $3.34 billion in 2010
  Confidence is the key and while the community has confidence in the future, and there remains a strong demand for further housing, house prices can hardly be expected to drop.
• Pride or Profit. How Much Will You Pay For Home Loan Satisfaction
  Australia wide surveys do seem to indicate that while the small lenders are mostly very competitive on fees and interest rates they do fall behind on the variety of features that the big players give.
• No Incentives, No Worries – 2010 Is Ripe For Home Buyers
  It appears that the early prediction for 2010 that interest rates were going to continue to rise were without foundation and now that stability has entered the housing market in both prices and in interest rates it is a good time to buy. But do so with caution and your eyes open.
• No government guarantee to shake up home loan market
  If you take notice of the interest rates now being offered, as well as fees along with the wide range of products on the market, you would have to agree that we have got through one of the most difficult periods in our financial history pretty well and that we still have a very competitive banking system in Australia that is both sound and robust.
• New homes become the first buys for 2010
  It is unlikely that the official interest rate will go beyond 4.5 per cent this year and possibly even into next year. It will depend a lot on what happens overseas but it all tends to encourage potential home buyers that now is a good time to buy.
• Guide to Interest Rates
  The recent Global Financial Crisis (GFC) could have had a much more devastating effect in Australia if the RBA hadn't lowered interest rates as they did during the peak of the crisis. This along with the Federal Government quick action in introducing their two economic stimulus plans prevented Australia from going into recession as most other economies did at the time.
• Borrowers snub home loans after rate hikes and lower incentives
  The big lenders may not be so inclined to lend the large amounts as they have in the past. This may not be a bad move as it may see home buyers looking for cheaper more affordable homes.
• Avoid Margin Property Investment Calls in an Uncertain Environment
  Investors, where they can, avoid margin calls in an uncertain environment because volatile share markets can become rather frightening for those who have borrowed, or geared, in order to get into the market.
• 2009: A year in review for home loans
  As first home buyers dropped out of the market due to the loss of the 'boost' incentive, investors saw an advantage of buying in. The 'hey day' of keeping the economy alive had ended and as things were getting back to normal once again the proportion of home owners who owned their properties outright was once again replaced by those buying.
• Where to make the most money in 3-5 years
  To make money in property you must have the right advice. Read this article and find out where you can make the most money in the next 3 – 5 years.
• Top Home Loans
  Choosing the right home loan will be one of the most important tasks you will have to undertake because if you happen to make the wrong choice it could cost you a lot to effect any change further down the track. It is therefore important to get it right first time around.
• How Much Will the BP Oil Spill Cost Us?
  BP has felt this spill deeply in their pockets, and so they should. In their aim to track and contain the worst oil spill in US history the oil giant has already spent the better half of $990 million. The question on every one's lips right now is "what happens after?"
• Who Will Pay the Mortgage of Lost Guatemalan Sinkhole Property?
  How could you prevent yourself from getting stung with a sinkhole on your house?
• First home buyer dilemma: property prices going up or down?
  As a first home buyer you don’t only have to understand boosts and loan criteria, you also need a thorough understanding of the economy and the property market, so read on to get a grasp on current issues.