Townsville home loan market recommendations
A veteran Townsville home loan industry insider has shed some unique insights into the home lending industry on the eve of another Reserve Bank (RBA) cash rate decision, with the industry predicting up to a further three interest rate cuts to boost the Australian economy.
In the current property market, North Queensland independent mortgage broker and Townsville home loan specialist, Ms Jemmy Best from Best Home Loans said, “Industry talk is that there will probably be another 3 interest rate reductions.”
“Obviously there is no crystal ball to confirm this but the consensus within the industry is that the cash rate may even go into negative territory, Ms Best said.
What is the national economic picture driving the cash rate?
Over the past year, 15,500 full-time jobs vanished from the national economy according to the Australian Bureau of Statistics. Part-time employment however increased by 50,200 during this period.
With a keen interest in monitoring the labour market, economists are predicting the RBA is likely to cut interest rates as it did last time by .25% based on unemployment data.
If the cash rate is dropped again by this amount, .75% will be a historic marker.
The latest employment data shows a slight increase in the unemployment rate, edging to 5.3% in August 2019. The unemployment rate represents the percentage of the entire workforce that is unemployed, actively looking for work and is willing to participate.
Economists have pointed out that Australia’s Gross Domestic Product (GDP) is at the lowest level since the global financial crisis, combined with an increasing unemployment rate, demonstrates the Australian economy is weakening.
Westpac’s Chief economist, AMP Capital, ANZ and UBS Economics have tipped a fall in October while the NAB tips a fall in November with further unconventional stimulus measures forecast for 2020.
What does this mean for mortgage holders?
Ms Best, a Townsville home loan veteran serving national clients for over 20 years said, “If a client is on a variable rate, they will be able to take advantage of any further interest rate reductions.
“At present we are not recommending clients to take a fixed interest rate.
“They can switch at any time from a variable interest rate to a fixed interest rate but would be required to pay a switching fee.
Consumer market monitor, Canstar finance expert Effie Zahos said, “It will be interesting to see what consumers do.”
“I suspect there will be token rate cuts, but with many savings accounts already at rock bottom rates, it’s going to be hard for banks, especially smaller ones, to pass on rate cuts to home loan customers.”
Canstar’s finance expert identified one way to benefit from an instant interest rate saving is locking in a fixed rate.
Three year fixed rates below 3% are available from a handful of lenders while the average standard rate is 4.11% with the big four banks.
“Normally, when you lock in a rate you pay more for that peace of mind, but right now it’s actually the other way round,” Ms Zahos said.
“This competition is always great news for consumers because it does ruffle some feathers, and those who are charging a premium will find that they will just stand out like a sore thumb and consumers will move.”
Best Homes Loans provides consultation to mortgage holders seeking a review of interest rates in order to be fully informed about the savings that can be achieved when cash rate changes occur.
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