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Empower Wealth Blog post by Empower Wealth

2015 Mortgage & Interest Rate Predictions Outlook

The current RBA cash rate is 2.50% and the loan offerings are certainly very attractive, but how long will this condition last? Is this the best time to fix your loan? Check out our 2015 Mortgage and Interest Rate Predictions with Simon and Ben to learn more.

 


 

Transcript:

Ben: Hello. Ben Kingsley here, CEO and Founder of Empower Wealth and today I’m joined by Simon Gillespie. Simon is one of our senior finance and mortgage advisers here at Empower Wealth, helping clients every day to find the best loan products.

So that’s one of the big conversations we’re going to be having now, loan products of 2015, and also at the end of this video, I’m going to share with you my interest rate prediction for 2015 as well. So Simon, let’s start with the top. What’s going to be the most popular product in 2015?

Simon: Yeah. I think we will see – we will continue on with the professional packages. They just provide great value. They do have an annual fee but when you weigh up all the advantages of that complete package, you can’t go past it.

Ben: So, let’s talk about some of those features that you get with a professional package. Let’s go through them. What are they?

Simon: We can structure your loan any way with multiple loan facilities and under the one fee, so your variable rates, your lines of credits for those who want to release some equity, fixed loans. It really is about control and flexibility about how you structure your loans.

Ben: Fantastic. So we get all of that extra advantage. We pay an annual fee but overall it’s a complete product.

Simon: Exactly. Not forgetting your offset accounts of course.

Ben: Of course, of course. The offset is a big part of that product as well. What about basics? Are we going to see anything happening in the basic loan space?

Simon: Possibly. I don’t think a lot. They do have their space but I’m not seeing a lot of it at the moment. But they do have a space but I can’t imagine that we’re going to see a lot of it.

Ben: Any new product launches in the space? I mean it’s a fairly predictable space, isn’t it? We’ve got variables. We’ve got lines of credit. We’ve got fixed lines. Any new products that you’re going to see enter the marketplace?

Simon: I can’t foresee that happening. Never say never. It may eventuate but at this point, I can’t say that.

Ben: OK. So no real big changes, no radical changes and look, that’s fairly predictable. We haven’t seen a lot of innovation in our mortgage space for a long time, have we? OK. So we know the most popular products for the year are most likely going to be pro packs. Let’s talk about fixed rates. What do you think about fixed rates at the moment?

Simon: Fantastic. I’m big on fixed rates. Not fully fixed loans. Obviously in certain circumstances, but generally I think a mix between your variable and your fixed loans. Flexibility, you have offsetting but control over your outgoings over the coming years, definitely.

Ben: So a bit of flexibility, so a bit of a hedge is basically what we’re talking about. All right. So we know that – now let’s talk about the competition in the marketplace. So what’s happening from a competition point of view? Is there a lot of competition out there?

Simon: Oh, yes. Oh, yes, there’s so much competition at the moment. It is not a better time than right now to be reviewing your loan or going back to your bank and asking for something better because there is competition. We’re getting some good discounts at the moment.

Ben: So what are we saying? Sort of if our loans are more than two to three years old, a good time to make contact and sort of compare some rates and some – compare some product features?

Simon: Definitely. Looking at the previous three to five years, there has been a lot of changes between interest rates and what banks are offering. So definitely within that timeframe, we’re going to no doubt be able to find something better.

Ben: So OK, then which lenders should we choose? Are we going to go mainly for the majors or what about the second tier lenders? Are they going to get some of our business as well this year?

Simon: Yeah, most definitely. I think it’s probably around a 50-50 mix. The majors are good. They are great. They are competent as are the second tiers, but you’re just going to get generally speaking better pricing with the second tier lenders.

Ben: Fantastic. So let’s wrap that up. Products, most likely professional package, more flexibility, more choice, lots of competition out in the marketplace. So that’s something to consider. Come and talk to us about that. We’re seeing that there will be real competitive advantages in terms of tailored solution for each client. Hedging a bit, it’s around fixed rates, and making sure you take advantage of some of these historical low rates.

That does lead me into the conversation about interest rates and I want to share my thoughts in regards to the predictions for 2015 around interest rates. Now the first variable that we can discount is inflation. It’s usually a big consideration for the reserve governor and the board but this year, it’s not going to be a consideration at all. The reason for that is the story of the oil price and that flow and effect in terms of how that’s going to affect the consumer levels of cost of living. So we won’t see any problems there.

In addition to that, we’re also seeing income growth in terms of wage increases, actually stagnating as well. So from that point of view, the genie is still in the bottle and will remain there for at least through 2015.

So what are the other variables that we’re looking at? Well, the reserve governor has got his wish and he has got the Australian dollar off that $1 parody down through the 90s and into the mid-80s and their early 80s. So he would be very happy with that because of the economic stimulus that does for our exports in terms of generating that type of capacity. So we get further exports good for GDP and that’s going to help the economy hopefully push through this softening period.

Now, around the nations, we’re seeing Victoria having some problems with its economic growth. New South Wales doing really well but that’s a story of employment.

So this is the other big story of this year. If we see unemployment rise, there’s going to be real pressure on the reserve governor and the board to drop rates and that’s going to be a real challenging decision for them.

In saying that, and this is my prediction and I will give you the reasons why I don’t believe rates are going to change even though most economists are predicting a rate change, and that’s a rate decrease.

The reason for this is house prices. So we are seeing through 2014 some really strong growth rates in Melbourne and Sydney and that’s concerning the reserve governor and the board because the property market does have such a big impact on the general economy.

So if we actually overheat price values, borrow too much, and we have a collapse in some areas of values, which after we have a good run there’s usually some areas, usually newer state areas that have – that suffer a decline in value. So we have potentially negative equity. That’s exactly where we don’t want to go.

So I’m hoping and I’m wishing the reserve bank will actually look at alternative ways to stimulate it. So by that, I mean looking at – seeing ways in which they can lend to business, lend to industry, lend so they take on the new opportunities in that area and employ people, because we are seeing too much household debt and that’s a concern for me broadly speaking.

So that’s why I think the reserve governor will keep their powder dry and I think we will see no change in interest rates through 2015. Now, obviously that’s a big part of what we talk about in the mortgages and I just want to reiterate for everyone that if you are looking to get your mortgage reviewed, if you’re looking to invest in property, we have a team of specialists here and that’s all they do. They look for the best loans from the best lenders. They take care of all the paperwork and they’re here to help out. So they do a great job.

So please, if you are interested in having a complimentary review or an appointment with one of our team, don’t be hesitant in filling out the form on our website and we will organise the time to meet.

If you’re in the state, that doesn’t bother us. If you’re also international, that doesn’t bother us either. We’ve got clients all around Australia and overseas. So we look forward to helping you on your journey to a wealthier tomorrow. Thanks for watching.

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