What is the ‘Cash Rate’

With all the talk of ‘interest rates’ and ‘cash  rates’ you may interested to read the RBA definition of the ‘cash rate’

‘Broadly defined, the term cash rate is used to denote the interest rate which financial institutions pay to borrow or charge to lend funds in the money market on an overnight basis. The Reserve Bank of Australia uses a narrower definition of the cash rate as an operational target for the implementation of monetary policy. The Reserve Bank of Australia’s measure of the cash rate is the interest rate which authorised deposit-taking institutions (ADIs) pay or charge to borrow funds from or lend funds to other ADIs on an overnight unsecured basis. This measure is also known as the interbank overnight rate. The Reserve Bank of Australia calculates and publishes this cash rate each day on the basis of data collected directly from banks. This measure of the cash rate has been published by the Reserve Bank of Australia since June 1998.’

Source: http://www.rba.gov.au/glossary/

 

 A Quick Overview of Loan Types

If you are looking to take out a mortgage loan there are many options. Here are some of the standard choices. Of course, each loan product is different, as is each lender and each borrower, so be sure to understand the product and get the right advice from an appropriately qualified financial advisor.

Basic Variable: this can best be described as a low interest rate, no frills loan where the interest rate which will often move (but not always) in line with changes to the RBA cash rate. Terms vary, but 25 to 30 years is the norm. 

Standard Variable: This is the most popular type of mortgage where interest rates also move in line with RBA cash rate changes. Interest rates can move up or down which will result in changes to repayments. As with the basic variable most have terms of 25 or 30 years.

Introductory or honeymoon rate: These loans offer low interest rates, usually for the first year on fixed or variable loans. At the end of the honeymoon period the interest rate will usually change to the institutions standard variable rate. They are particularly useful if you think you can reduce the principal quickly by making extra repayments. Be aware that if the honeymoon rate is fixed and interest rates are reduced during the period this may be a negative. An offset account may be available with this type of loan.

Fixed Rate: This fixes the interest rate on your loan for a specified number of years. Once the fixed rate period is finished the rate generally reverts to the institutions standard variable rate. This may be a good option if interest rates are rising but if rates are falling you may be on the losing side of the deal. Bulk repayments on fixed term loans are generally restricted.

100% Offset Accounts: Offset accounts allow for funds held in an accessible deposit style account to be offset account from the loan balance before interest is calculated. This effectively reduces the amount of interest charged. It is usually offered on standard variable and introductory mortgages.

Line of Credit: Allows the borrower to draw down on their loan at any time up to a pre-arranged limit. There is no set term on a Line of Credit

Five Reason’s Your Property Isn’t Selling

  1. Property Price. Without a doubt when selling property we all want the best possible price that the market will pay. Real Estate Agents should be giving you a realistic range of where a property is expected to sell and this price range should be substantiated by accurate comparable sales. You can then make and accurate and informed decision as to where the price for the property should be advertised. Beware of the agent who offers you a price too good to be true. They may be trying to buy your listing and your property may then be slow to sell until the price is back in the range where buyers see value. Try to keep emotion out of your decisions.
  2. Agent Price. On the opposite side, some vendors will make a decision on which agent to use based on the lowest price or the cheapest advertising. This can be a big mistake; agents offering heavily discounted fees and advertising obviously are do so for a reason. Please do your own research and choose the agent who is best for you and your property.
  3. Property Presentation. Show your property at its best. That does not mean it has to be a lift out from a style magazine, but it should be clean, de-cluttered and easy for prospective buyers to visualise living there themselves.
  4. Marketing. Long gone are the days when you only need to advertise your property in the local paper to attract interest. Now it is a comprehensive and structured approach which is required. People need to know your home is for sale and the adage ‘you can’t sell a secret’ is so true. Consider all the marketing options an agent is presenting to you; Internet, photography, house plans, videos, print, social media and a strong local presence with knowledgeable local staff.
  5. Get Out of the House! During inspections some vendors want to stay and watch what is going on. This is a big no no. Prospective buyers want to be able to discuss the property freely and openly without offending the owner. Go for a walk, go for a coffee, do the shopping, but get out of the house during inspections.

Cash Rate Unchanged March 2015

Interestingly enough, after all the media hype about a possible cut to the cash rates, the RBA has today left the cash rate unchanged.

RBA Governor Glenn Stevens said “At today’s meeting the Board judged that, having eased monetary policy at the previous meeting, it was appropriate to hold interest rates steady for the time being,” RBA governor Glenn Stevens said in a statement today. “Further easing of policy may be appropriate over the period ahead, in order to foster sustainable growth in demand and inflation consistent with the target. The Board will further assess the case for such action at forthcoming meetings.”

“We also know that as rates get lower, there’s only so many more cuts they have in the bag so they need to choose wisely when they do this and we expect them to keep a very close eye on a few things – property prices, the Australian dollar and resource prices, unemployment and inflation – over the next couple of months and then look to cut again sometime this year.”

It certainly is a case of ‘watch this space’ over the coming months to see rates may go and where the next move may be.

RBA Cash Rate Decision today at 2.30pm – Will they drop again?

It will be interesting to see what the RBA announces today at 2.30pm (AEDT) with regards to the cash rate. The broader media is reporting that many economists are forecasting a further drop to 2% amidst signs of weaker business investment. If the RBA does cut the cash rate it will be interesting to see if the banks amend their lending rates. No doubt those reliant on deposit income will not welcome the change.

Welcome

Welcome to our new blog on all things to do with Indigo real estate and our immediate catchment of Beechworth, Chiltern, Stanley, Wooragee and Yackandanadah.

If you are interested in the local and regional property market then this is a great place to start. We will provide you with the latest links to new properties coming on to the market be they for sale or for rent. In most cases you will find them here before they even reach the major websites.

We will also be posting interesting and useful tips, news stories and updates about Indigo Real Estate and what we are up to and where.

We look forward to seeing you soon, having a chat about real estate or maybe what’s going on in our region.