Interest Rate Update for August 2024

In August, the Reserve Bank gave us a big surprise, with a 0.25% interest rate drop. Why a surprise? Because even in May they were saying they were more likely to increase rates than drop them.

Some people are complaining about that, but I’ll take the gift and no questions asked. I’d rather the Reserve Bank respond to change rather than stick their heads in the sand.

Why did they drop rates?

Well, if the economy were a car, inflation is your speed and Interest rates are the brakes. If you’re going too fast, you brake. When your speed is under control, you leave the brakes alone.

And as I think we all know far too well, our economy definitely isn’t speeding any more.

• Inflation is moving back into the 1-3% target band.
• Our economy looks like it’s going to start shrinking, just like other economies around the world.
• The housing market has pretty much ground to a halt.
• Business confidence is pretty average, with lots of people in “Survive till 25” mode.

So what does this mean for you?

These rate cuts are just the beginning.

Financial markets now expect almost 1% of cuts before the end of 2024.

Banks moved fast and dropped their rates on the same day as the announcement, with their usual wiggle room on longer terms. Some banks are now offering fixed rate specials as low as 5.99%.

If I was deciding what to do with a loan today, I’d fix for at least six months and maybe more. That way I’d be able to step off the fixed rate at the ground floor, ready to fix in a good rate for as long as possible.

There’s big differences in the interest rates on offer right now

Bank floating rates are showing a 1.2% or more difference between the best and the worst rates. For a $500,000 loan, that would be about $380 a month extra.

We know who has the best rates and the best terms, and we can usually shave a good half percent off their published rate too. That’s another $100 a month. Whether you want to fix or float right now, get us to go into bat for you, even with your current bank, to make sure you get the best rate possible.

Remember if you want to save money, your biggest expense is the place to start – and for most of us, that’s our home loans. If we can help, don’t hesitate to give me a call.