An interest in interest
“The one thing most people set and forget is their home loan interest rates — if I asked you what it was now, could you tell me?”
Do you set and forget or sit and forget, W hat’s the one thing that you try not to think about? Well, not so much try not to think about, rather you don’t think about at all. No, not the time you dyed your hair black when you were a blond trying to be Robert Downey Jnr from Iron Man for a fancy dress party ... I swear the packet said it would fade and wash out in a couple of weeks … nah, that didn’t happen!
Now, I know I touched on this recently. However, I think it is timely to delve a bit deeper given the ongoing headlines, which I am sure most people mainly ignore, but I am sure that like me, there have been some changes.
The one thing most people set and forget is their home loan interest rates ─ if I asked you what it was now, could you tell me? Like me, without checking my internet banking or calling the bank manager, your answer would probably be no.
I recently checked mine after the last round of increases and there wasn’t any change. A couple of weeks later, a small notation on my bank statement advised me it had increased a few points. The rate is still okay, and given the other things I have going on with my bank I’m okay with what it is, as it’s still at the low end of the market.
So I am sure most people have now worked out that the banks are changing the way they balance their ledgers; part of this is brought about by the public and political pressure being brought to bear on the banks to make the property market more equitable and more accessible to rst-home buyers.
For some reason people seem to think that if you punish the investor for buying another property, it will somehow open the market to the rst-home buyer. Maybe, maybe not. Investors will always be in the market; investors will always take a punt because they have already established themselves, and the cost is, in the main, tax deductible. Depending on your income bracket, the more you pay, the bigger your refund/ deductions can be. So what am I getting at, given the recent changes by the banks to increase the interest-only rate for loans and, at the same time, sneak-up a few xed rates and the standard principle and interest rates, it’s probably time to check what you’re paying.
Now, we all know that nobody works for free – we don’t, so the banks won’t. The banks are looking to protect their margin and income in what is becoming a heavily competitive market. Strangely, though, despite the headline rates, (loss leader to get you in), when you sit and go through it all, the actual margin between low and high is not much. Some that say they are low on rates actually sneak up to a higher return by charging a monthly account-keeping fee. Others don’t allow you to have a mortgage offset account on their basic rate deal. Others insist that you put all your money into your mortgage and live off a low-rate credit card that you clear every month.
WATCH YOUR PENNIES
All these types of accounts and many other types have their advantages and disadvantages, but the bottom line is you must manage your money. When I talk about mortgages with our mortgage person, we both keep coming back to the one message: Keep it simple; what do you need it to do; be easy to manage; and, me personally, I like an offset account. You can park your excess money in the account and every dollar in there offsets a dollar of debt, then when you need it, you just move it back to your working account. You will be surprised at the difference that will make to your interest payable each month. Remember, every dollar you don’t pay interest on is an extra principle deduction when the payment is made.
Finally, if you think your interest rate is too high, call your bank rst. As with all banks, it’s cheaper for them to keep you than it is to nd a new client. Often a phone call is all that’s needed. If you get the cold shoulder, don’t be afraid to shop around. If you don’t want to do it yourself, call me and we can help you through what is sometimes a maze of options.
Well, enough from me for this month, if you have any questions or you want to discuss any matter, please feel free to drop me an email or give me a call, I’m always happy to listen and give you my opinion.