2023 March 8th – Your Finance News

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Hi *|FNAME|*,

At its meeting yesterday, the RBA Board announced a 0.25% increase to the cash rate, lifting it to 3.60 per cent. 

Economists are commenting there are signs that the aggressive rate increases are having the desired effect on inflation, but today’s decision shows the RBA doesn’t think the rate rises have had sufficient impact just yet.

To prepare quality advice we need to know the market. Since January 2003 EquityVision has been tracking the difference between Basic Variable rates and the 3 Year fixed rate, in this newsletter we share our findings from the past 20 years.

With each rate rise, the banks deliver updates to clients interest rates. We demystify some Bank language which is included in these communications.

As always, if you have any questions regarding your current loans or future finance needs, feel free to email or click the button below to book an appointment.
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It is important for mortgage brokers to know interest rate movements because it affects their clients’ ability to obtain and manage their loans and this understanding helps us provide informed advice when helping our clients choose the right loan. 

Interest rates can vary depending on the type of mortgage, such as fixed-rate or variable-rate mortgages. Knowing interest rate movements provides vital information we can use to guide clients to choose the best mortgage product that fits their financial situation and goals.

In January 2003 we started tracking the differential between the lowest 3 year fixed rate we have available against the ANZ basic variable rate loan, this data now spans 20 years and provides interesting reading.

Over the period Jan 2003 to Mar 2023, the highest basic variable rate we recorded was in June 2008 when it peaked at 8.77%. 
On average over the 20 years, the basic variable rate was 0.11% higher than the 3 year fixed rate.

This gap has varied significantly over the years, for example, in Dec 2009 during the GFC fallout, the 5.59% basic variable rate was 2.20% lower than the 3yr fixed rate.

The largest gap in the other direction was Sept 2021 at the peak of COVID when the banks were beneficiaries of cheap RBA money, at this point in time the 3yr fixed rate of 1.85% was less than half of the 3.81% basic variable rate.

This month (March 2023) the basic variable rate is currently lower than the 3 year fixed rate by 0.25%.

The impact of rates can be significant, on a $500,000 home loan, a 0.5% increase in interest rates can result in a $150.00 increase in monthly repayments.

We are ready and available to discuss questions about your home loan rate, please reach out for a chat.
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 Demystifying Bank Speak

With multiple consecutive RBA interest rate increases now behind us, we are getting used to receiving a monthly email from our banks advising our home loan interest rate has changed.

These communications include some terms which fall into the category of bank speak that we hope to demystify for you.

The communications will generally include your name, the home loan product and account number is provided to identify the loan impacted.
The next part can cause some confusion, it includes a Reference Rate, the Discount off the Reference Rate and Your New Interest Rate

The reference rate is your variable rate before any discount or margin.
The discount off the reference rate is what we have negotiated with the bank on your behalf and this discount is applied for the life of the loan.
Your new interest rate is the reference rate less the discount, this is the rate used by the bank to calculate your new repayments.

For example, if the bank reference rate is 7.35% and the discount is 2%, then your new interest rate will be 5.35%.

You are also advised of your new minimum monthly repayment amount and the date it is effective from.

Direct debit repayments are automatically updated by the bank, if you are making payments via EFT or salary credit, you will need to update your payment amount before the effective date.

If you are already paying more than your minimum monthly repayment, the amount wont change.

We place importance on our business by staying connected with our clients – providing education and sharing our expertise.

If you would like to discuss your loan options, please contact the EquityVision office on 03 8372 0775, email or book an appointment using the button below.
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Our business is built on referrals from our clients, for users of these platforms, we would love for you to click the links below to follow our pages, stay in touch, and to refer your friends and family.

Kind regards,
The team at EquityVision 
Your Mortgage and Finance Brokers
Suite 6 / 296 Bay Road Cheltenham VIC 3192
Michele Mansfield (CR No.399836) and Alisha Perry (CR no.502031) and Damien Hauser (CR no.516645) are credit representatives of Buyers Choice Licencing Pty Ltd (Australian Credit License No. 509484).
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