Last month saw a decrease in the Official Cash Rate (OCR) and the banks’ mortgage interest rates nudged up … go figure! So, Brendon Ojala offers a quick reminder on the different factors that dictate how banks price their interest rates.
The interest rate you secure will depend on all of the following factors:
· The OCR and predications as to what it will do next—most pundits are saying watch for another drop in November.
· The international wholesale interest rates (watch the US Government, Fed, interest rates).
· The amount of deposit funds the bank has available and what they had to pay to get this (this is normally cheaper for a bank than “buying” funds on international markets).
· The amount of market share a bank has verses what their target is (if they need more, they will drop rates).
· The size of your loan.
· The LVR (the amount of equity) you have in your property.
· Whether it is an investment property or owner occupied (or commercial property for that matter).
· What competing banks are doing.
What is the moral of the story? Just because your cousin’s brother got a 4.15 per cent rate for one year, it doesn’t mean you will too.
All of the above eight things change all the time, so have a conversation with your Velocity Financial adviser to determine the best structure of your home loan. This is the most important conversation and, from this, we will be able to talk about getting you the best rates.
The good news is that for those of us with home loans, interest rates are at historic lows. So my suggestion is this: let’s make the most of that to help achieve our financial goals.