Welcome to 2017! This year, we have huge plans relating to our services here at Mortgage Broker Melbourne, and one of the things that we plan on making a lot more transparent is the way in which interest rates on mortgages actually work. We’ve covered the subject dozens of times in the past, but if there’s one thing that our clients are struggling to grasp, it’s just how these unique fees function.
What Makes an Interest Rate… Interesting?
There’s one bank in Australia that’s in charge of all financial lending policies and that’s the Reserve Bank. These big boys calculate a range of factors every single day – and over the course of the year they will have prepared their lending potential for the year ahead. 2017 has now arrived and with it brings a shift in interest rates – and as these rates are defined by the Reserve Bank too, it can be easy to confuse the percentages with those offered by traditional banks and lenders.
As things stand, the RBoA is boasting all-time low rates of just 1.5%.
That’s 1.5% that they are able to offer to those that they lend money to, as well as any customers that are able to sign up and use the services offered by the Reserve Bank. Let’s imagine that you’re not going with these guys however (as they are simply an authority that’s in charge of lending), and that you’ve opted for a more local alternative.
You might walk into the bank and expect them to honour the definitively low rates of 1.5% – and although some try to keep their percentages as close to this number as possible, others simply can’t afford to. All businesses need to make money in order to maintain their productivity and this is something that you will need to consider.
So, How Will Rates Fair this 2017?
If you imagine that a business sells shoes, but doesn’t manufacture them – then you’ll undoubtedly agree that they will need to get their stock from somewhere. From a bank’s perspective they will receive their funding from the reserve bank, who could be metaphorically deemed the supplier of the shoes in question.
But a bank won’t make much of a profit if they are paying back 1.5% of what they borrow to the shoemaker – so they will need to up their rates if they are to turn a profit. That’s why applicants are often faced with higher rates, with the following being the most up to date available to the general public:
60% of banks are currently offering rates of 3.99%
20% of banks are currently proposing terms of 3.89%
10% of banks are offering rates of 3.74%
10% of banks are offering anywhere between 3.59% and 4%
These amounts look set to stay as they are until at least June of 2016 – but if you act quickly, we might be able to connect you with an even more affordable deal, or a fixed rate to ensure that your repayments remain consistent well into the future.