Australian Mortgage and Loan Information

Rate Hiked Again.

Australian Home Loan Interest Rates Hiked 25 Basis Points

The RBA board has decided in its wisdom to raise official interest rates again. The third time in three months. The reasons are not plain to ordinary small business people or home mortgage holders and in my opinion, way to optimistic. The financial crisis is far from over at street level. Lending is tight and many properties very much overvalued.

The latest rate increase means a person who has a 30 year $300,000 mortgage is now going to pay $150 more per month than they would have before this latest hat-trick of interest rate hikes.

So how can you keep your sanity and reduce the effect of these rude, unnecessary and Christmas Grinch like increases?

Increase Your Loan Term:
Contact your broker or lender and see if you can stretch your payments over a longer period. This will lower your current monthly payments and assist your cash flow. The drawback is unless you can eventually pay more monthly, you will pay more interest to your lender over time.

Switch To A No Frills Loan:
Consider switching your home loan mortgage to a no frills operator like MyRate. You don’t really need a branch network to help manage you home loan, you have the Internet. The rate will be lower the only hassle may be getting your current lender to co-operate quickly.

Consolidate Your Personal Borrowing:
It may be a good time to assess the need for those credit cards. Fold your debt into your home loan and cut up the cards. You may not feel as affluent, but you may just enjoy your life a little more without the financial pressure. If your current lender wont help, get a reputable broker to help you.

Fix Your Rate:
You may think the horse has bolted here, but maybe fixing half your loan will at least give you some certainty moving forward, without getting caught out if rates fall, if the financial crisis/credit squeeze worsens.

Earn So Extra Cash:
Start a home based business in your spare time and use the profits to pay off your mortgage.
A Kiwi named Mark Ling has a few ideas. I am currently trying to copy his methods. An extra $500 per month will come in very handy to thwart the RBA and the Lizard conspiracy.

Or you could sit back, do nothing and see if the predictions about 2012 are correct. If they are the mortgage will not be such a worry.

I received the following email from my mortgage broker today. Because of my diverse income streams I used lo doc for one of my loans. He is touting for business I am sure, but the letter also drives home the fact that we have a very different lending environment going forward into 2010.

Here’s the letter:

“I am sending you this email to advise you of some SIGNIFICANT changes that have occurred in the Low Doc market over the last few months.

4/ If you want to buy another Investment property”

I personally think we are returning to the nasty old days like in the 70’s, this means less people able to get loans and a stagnant property sector. I hope I am wrong. Take a look at interest rates in the 70’s, they are high, but not that bad. People just could not get a loan and banks were stupidly tough with lending. However the bankers of that day did not enjoy the extreme bonuses of their counterparts today, so I am guessing the rouges of Martin Place and Collins Street will find a way to gain from others misery.

Now, may just be the time to fix some of your loans for a year or two.