It’s a common misconception that mortgage offset accounts are loan products when in fact they are savings accounts sitting within a mortgage structure. If you’re not sure how mortgage offset accounts might benefit you – read on!
You’re moving into your new home; corks are popping and there are smiles all around – classic advertising that for many seems unattainable.
Although many Australians may want to bash the banks over tighter home lending criteria, it’s the bank regulator, the Australian Prudential Regulatory Authority (APRA) that has set these requirements to address the risks in the mortgage market. Low deposits were increasing the risks carried by lenders.
It goes without saying that homebuyers love low interest rates. The lower the interest rate the less the mortgage repayments on a particular house, right?
Well, maybe.
Lower interest rates also mean borrowers can service a bigger loan. In a competitive housing market that can push up prices, as we have witnessed this past decade.
So what’s really going on? Have low interest rates been good or bad for homebuyers?
The Reserve Bank of Australia (RBA) and the major trading banks may play the most visible role in setting interest rates, but in many cases they are being reactive rather than proactive.
A wide range of external factors feed into their decision-making process, including in no small part, our collective behaviour as investors and savers, borrowers and consumers. Then there’s the rate of inflation and wages growth, foreign currency exchange, the economic health of our trading partners, and the interest rates paid by local banks to borrow money from overseas.
Suddenly it’s not so easy to figure out where interest rates are headed, even in the short term.
Access our Infographic that explains how falling interest rates may affect housing prices
With so much uncertainty surrounding who now has more control over setting mortgage interest rates – the Reserve Bank or the banks – it is timely to think about your loans and whether they are structured to suit your needs into the future. One of the most obvious considerations for your home mortgage is whether a fixed or variable rate loan is best for you.