It was only a few months ago we wrote an article on the pros and cons of fixed rate mortgages. At the time most economists were expecting the RBA to continue its monetary tightening strategy well into next year. Today, only a few months on, most economists have adjusted their short term view, talking down the likelihood of further rate rises this calendar year.
This change in attitude and forecasting has had an immediate impact on fixed rate mortgages. Scott McWilliam, Homeloans’ General Manager, Operations says many lenders, including Homeloans, started cutting shorter term fixed rates in June. “Most borrowers should still be able to access cheaper variable rate mortgages, but the gap between the standard variable rate and the average one to three year fixed rate has narrowed significantly”, Scott said.
Perhaps alarmingly for borrowers, however, is that monthly inflation is now tracking at around 3.6 per cent, which is outside the RBA’s comfort range of two to three per cent. Despite the RBA leaving the cash rate unchanged for the second consecutive month in July, local inflation numbers will carry a heavier weighting on monetary policy decisions than the recession concerns in the U.S. and the sovereign credit crisis in Europe.
On a lighter note, Homeloans has now planted nearly 1,500 trees since embarking on this carbon conscious initiative earlier this year. Whilst it will not lower your interest rate, it is rewarding to know you are making a difference!