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RBA Changes

RBA Changes

Sarah Wells

Sarah Wells is a Senior Finance Executive, and resident specialist on finance for medical professionals, here at Finance Detective. Read here for her take on tomorrow’s RBA board meeting:

The waiting game is almost over!
Within the next 24 hours, the outcome of the last RBA board meeting for 2015 will be announced.

Over the past month there has been strong signs for a full 0.25% rate cut in our financial markets. However, the majority of economists do not believe this will eventuate. Given that the RBA’s current focus is on overall growth, a rate cut tomorrow seems unlikely.

On the bright side, consumer confidence (along with the outlook for Australia) and business performance rose by 3.9% in November. This marks only the third month, of the last 21, that optimists have outnumbered pessimists. It seems like “the glass is half full” as we head into 2016.

Looking ahead to 2016, I believe there is a high probability of a rate cut in February, should inflation remain below the RBA’s target. However, if inflation begins to rise, it is unlikely that there will be any rate reduction. The general feeling is that the growth outlook for the economy, throughout 2016, is likely to lose some momentum. This will ultimately increase the likelihood of further rate cuts and may also be coupled with the government engaging other options to assist Australia’s economic performance.

So what does this mean to you, as a consumer?

In the past few months we have seen interest rates on investment loans (and home loans in general) increase by between 0.50% and 0.75%. This means that if you have an average loan of $400,000, you will pay $2,000 to $3,000 more in interest per year! It seems absurd that consumers are paying more interest on their home and investment loans, in an environment where RBA is considering rate cuts. Our advice: take this opportunity to investigate your loan options. In most cases, our experience has shown that people are paying too much interest on their loan.

Recently, I helped a client who was overpaying interest on her home loan – she was paying $500 per month more than she needed to, this adds up to $6,000 a year! She is now a happy client of ours, and planning to spoil her family this Christmas.

Even though the RBA’s current activity may not be impacting you personally, reviewing your loan in the next month or two may help to ensure you are looking after your family’s financial health.  We could all use a few thousand dollars extra in our pockets, maybe we could even pay for next year’s holiday!

Stay tuned for tomorrows outcome…