Home loan Rate Drop BEFORE the Reserve Bank Meeting...
Home Loans News: 20 Oct 2008
A price war in Australia's mortgage market is underway with National Australia Bank (NAB) following ANZ Banking Group (ANZ) and Aussie Home Loans in reducing its interest rates on home loans NAB announced it was dropping the interest rate on its standard variable home loan by 20 basis points to 8.36 per cent.
The 0.2 per cent cut will also apply to business loans, and some rates on fixed mortgages will be reduced by 0.3 per cent, the bank said in a statement.
NAB's one-year fixed home loan has been cut by 30 basis points to 6.99 per cent.
Policy measures taken by the Federal Government earlier this month have had a positive impact on the credit market, enabling the bank's funding costs to fall, Ahmed Fahour, executive director and chief executive of NAB's Australian operations said.
"We welcome this new development and anticipate that we will see some relief in the significantly higher premium we are currently paying for wholesale funds.
"Should this be the case, then we hope to be in a position where we can pass on further interest rate cuts to our customers," he said.
NAB's announcement came hot on the heels of Aussie Home Loan's decision to drop its rate on variable home loans for first home buyers by 30 basis points to 7.79 per cent.
Aussie Home Loans reduced interest rates for fixed home loans and will review its loan rates for new and existing customers in line with its funding requirements, managing director John Symond told AAP.
On Friday, ANZ Banking Group lowered the interest rate on its standard variable home loan by 25 basis points to 8.32 per cent for new and existing customers, effective from Monday, October 27.
ANZ's move was the first move to rates independent of the Reserve Bank by a banking institution in over a decade.
Rates on standard variable mortgages from Australia's major lenders in the banking sector now stand at 8.32 per cent at ANZ, 8.36 per cent at National Australia Bank, 8.53 per cent at Commonwealth Bank of Australia, 8.56 per cent at Westpac, 8.57 per cent at St George Bank, and 8.6 per cent at Bendigo and Adelaide Bank.
Australia's major lenders in the banking sector reduced their variable home loan rates on October 7 in reaction to the RBA's surprise 100 basis point rate cut, and said further cuts would be dependent upon their funding costs from offshore wholesale money markets.
Goldman's chief economist Tim Toohey said the US commercial paper markets - where banks source much of their funding - had improved which would see banks' funding costs fall, allowing them to pass on a greater proportion of future RBA rate cuts.
"There's a very important development that's occurring in terms of opening up of the commercial paper markets in the US.
"If those spreads start to come in, we actually do think that the spreads that matter for the banks or the banking system will in time start to come down as well," he told ABC TV.
"So (the banks) have held a little bit back... as we move forward from here, we see a smaller case for them to actually continue to hold back," he said.
SOURCE: aap
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New savings scheme to get you closer to home
The Rudd Government's new home saver accounts aren't exactly a way of raiding your super for a home deposit - your home deposit can finish up in your super fund if you're not careful - but they'll give you up to $3400 ($6800 for a couple) plus tax breaks worth about $1000 a year.
They're not to be confused with the $7000 grant that first home owners can also get. You can avail yourself of both, though they have slightly different rules. Unlike the grant the new accounts don't mind if you've previously owned an investment property, and can be used for buying a block of land so long as you eventually build something.
Interest on the new first home saver accounts will be taxed at a flat 15percent, just like a super fund, and the Federal Government will put 17 per cent in as a grant. The most it will hand over in a year is $850, which requires a deposit of $5000.
Needless to say, you're only allowed one account. The Government isn't that silly. Or maybe it is. A couple can have separate accounts and so get twice as much, or a maximum of $6800 over four years.
You won't get its contribution till you've filed your tax return - there's always a catch, isn't there? - but once in it'll earn interest.
Unlike super, you can't salary sacrifice into the account. So it's just like putting money in the bank. Withdrawals, which can't be made for four years, are tax free as well. But they have to be used to buy a first property - as a deposit, for legal fees, stamp duty or whatever, is up to you.
And no, you can't stick the $7000 home grant into the account. By the time you get the grant, the account will have closed. Otherwise your savings will have been flicked into your super fund, untouchable for another 40 or 50 years.
Oh, did I mention you have to buy a place before you turn 65? Better get moving. Change your mind about buying a property, however, and the Government will have no hesitation in shifting your money into a super fund. That'll teach you.
The other condition is you must deposit at least $1000 in each of four financial years. At least they don't have to be consecutive.
If you've already saved, say, $6000, don't put it all in at once. You'd do better to put $5000 in straightaway, and leave the other $1000 for after July 1 so as to get the Government contribution and a credit for two years' saving.
By the way, only one partner of a couple has to meet the four-year rule when taking the money out. The most you can put into the account is $75,000 though this is also indexed.
Only two big banks will have the accounts running on Wednesday - ANZ will pay 7percent (you must deposit $10 or more a month); Commonwealth, 6.5percent. Remarkably, none of the accounts have fees.
AMP Banking will offer a honeymoon rate of 8percent; the rate reverts to 7percent from January 1. These rates are variable. Sorry, there's no term deposit-style fixed-rate version.
The tax breaks and handouts are worth almost $1000 a year on a $5000 deposit for those in the 30percent bracket. Anybody can make a deposit into the account.
"It's a great way for parents and grandparents to help ... they can be secure in the knowledge that the money can't be frittered away on overseas trips and things," said Steve James, chief executive of Teachers Credit Union.
Hmm. Don't tell mum or dad, but there could be a case for letting the grants go and saving like mad instead so you can buy an investment property. That way you keep costs down by living with mum and dad, collect the rent and reap any future capital gains.
Mum's the word.
SOURCE: David Potts - Sydney Morning Herald
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