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RBA cash rate unchanged at 1.5%

RBA cash rate unchanged at 1.5%

The Reserve Bank of Australia (RBA) has kept the official cash rate unchanged at an historical low of 1.5 per cent.

The last RBA cash rate change was in August 2016.

In a statement released today, Governor Philip Lowe has attributed the decision to low wage growth, an appreciating Aussie dollar and household income to debt ratios. 

“Wage growth remains low. This is likely to continue for a while yet, although the stronger conditions in the labour market should see some lift in wage growth over time.

“Inflation also remains low and is expected to pick up gradually as the economy strengthens.

“The Australian dollar has appreciated since mid year, partly reflecting a lower US dollar.

“The higher exchange rate is expected to contribute to continued subdued price pressures in the economy,” said Governor Lowe. 

And it’s not just impacting price pressures, with Governor Lowe stating it is also weighing on the outlook for output and employment, with an appreciating exchange rate resulting in a “slower pick-up in economic activity and inflation than currently forecast.”

“Growth in housing debt has been outpacing the slow growth in household incomes for some time,” he said.

Although Sydney housing prices have reportedly gone backwards for the first time in 17 months, the housing market conditions continued to impact the RBA cash rate decision. 

“Housing prices have been rising briskly in some markets, while in others they have been declining,” he said.

In Sydney, where prices have increased significantly, there have been further signs that conditions are easing.

In the eastern capital cities, a considerable additional supply of apartments is scheduled to come on stream over the next couple of years. Rent increases remain low in most cities.

“The low level of interest rates is continuing to support the Australian economy,” explained Governor Lowe.

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When do mortgage payments start after settlement?

Generally speaking, your first mortgage payment falls due one month after the settlement date. However, this may vary based on your mortgage terms. You can check the exact date by contacting your lender.

Usually your settlement agent will meet the seller’s representatives to exchange documents at an agreed place and time. The balance purchase price is paid to the seller. The lender will register a mortgage against your title and give you the funds to purchase the new home.

Once the settlement process is complete, the lender allows you to draw down the loan. The loan amount is debited from your loan account. As soon as the settlement paperwork is sorted, you can collect the keys to your new home and work your way through the moving-in checklist.

Why does Westpac charge an early termination fee for home loans?

The Westpac home loan early termination fee or break cost is applicable if you have a fixed rate home loan and repay part of or the whole outstanding amount before the fixed period ends. If you’re switching between products before the fixed period ends, you’ll pay a switching break cost and an administrative fee. 

The Westpac home loan early termination fee may not apply if you repay an amount below the prepayment threshold. The prepayment threshold is the amount Westpac allows you to repay during the fixed period outside your regular repayments.

Westpac charges this fee because when you take out a home loan, the bank borrows the funds with wholesale rates available to banks and lenders. Westpac will then work out your interest rate based on you making regular repayments for a fixed period. If you repay before this period ends, the lender may incur a loss if there is any change in the wholesale rate of interest.

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If you are on a variable rate home loan, every so often your rate will be subject to increases and decreases. Rate changes are determined by your lender, not the Reserve Bank of Australia, however often when the RBA changes the cash rate, a number of banks will follow suit, at least to some extent. You can use RateCity cash rate to check how the latest interest rate change affected your mortgage interest rate.

When your rate rises, you will be required to pay your bank more each month in mortgage repayments. Similarly, if your interest rate is cut, then your monthly repayments will decrease. Your lender will notify you of what your new repayments will be, although you can do the calculations yourself, and compare other home loan rates using our mortgage calculator.

There is no way of conclusively predicting when interest rates will go up or down on home loans so if you prefer a more stable approach consider opting for a fixed rate loan.

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A fixed rate is one which is set for a period of time, regardless of market fluctuations. Fixed rates can be as short as one year or as long as 15 years however after this time it will revert to a variable rate, unless you negotiate with your bank to enter into another fixed term agreement

Variable rates is that they are typically more flexible than their fixed rate counterparts which means that a lot of these products will let you make extra repayments and offer features such as offset accounts however fixed rates do offer customers a level of security by knowing exactly how much they need to set aside each month.