The article above sounds like great news for home and investment loan borrowers with the throw away comment from Glenn Stevens that the RBA has no intention of moving rates in the foreseeable future.
This of course means nothing as history shows us that economic environments can turn on a coin, and the RBA can react just as quickly.
I’m also always bemused with “economists” predictions.
Having been in finance for over 30 years, I gave up a long time ago relying on “economists” telling us what the next movement of rates would be. It was only last year when many of them were predicting an increase in rates immediately, only to see the cash rate go down to 2.5% and remain there for the last 12 months!
History is littered with these economists making predictions that simply end up being wrong.
So if the economists can’t get it right – who do you listen to?
Our opinion has always been to look at what the fixed rates are on offer and act accordingly. With the recent bidding war of the banks at 5 years under 5%, this represents the cheapest money for some time.
If you are after peace of mind, it would be worth considering locking in. These low rates haven’t been seen in the market for a long time and you really can set your watch to where you will be when the fixed rate period ceases.
Equally though, take comfort in the fact that the banks obviously don’t see rates sky rocketing in months and years to come – otherwise they wouldn’t be offering cheap money.
Lock in on a low rate now and give yourself absolute peace of mind for the next 5 years? Perhaps. But again, if rates continue to fall, don’t complain.
Stay variable in the hope that they stay down (or even drop further)? Maybe. But remember if they go up, don’t beat yourself up.
One we would strongly recommend is that we can all take advantage of the cheap rate environment currently, so if your budget allows, now is the time to pay overs. It will make a massive dent in your debt and will prepare you well should these rates take an upward swing in the future.
Of course, all of the above can be facilitated for you with a review of your finances with an award winning Zobel consultant. You need to be working to a plan and that’s exactly what we are here for.
Oh and one more tip – if you decide to take the advice of the national “economists” regarding what is going to happen with rates, don’t hesitate to flick them an email if they get it wrong!