FS360 Episode 20 - How can I take advantage of low rates?

How can I take advantage of low rates?

The Australian Government and Reserve Bank are doing everything in their power to keep the economy going and it has provided some great chances for people and businesses to take advantage.

Gavin, Chris and Director of Lending at Mulcahy & Co, Neil McCahon, delve into these opportunities in Episode 20 of the FS360 podcast.  

Neil says home loan rates are very competitive at the moment. Variable rates are in the low 2 percent range, with fixed rate options looking strong, some under the 2 percent mark. You can lock in four years on a home loan owner occupied under 2 percent, with a couple of two and three year options around that mark also.

In the business and farming industries the rates are also around the 2 to 3 percent marks, so there are some great opportunities for those who can, to take advantage.

Chris says interest rates are always a reflection of where the economy is. 12 months ago, the rates were higher and estimated to climb but there’s been three decreases due to COVID, hence the encouragement to take advantage if you are in a position to.

“In business lending for example, the government is guaranteeing 50 percent of some of those business loans. So, the government and Reserve Bank are doing everything they can to keep the economy going,” he said.

Thanks to this, lending in the housing industry is really strong. Neil says across the industry, the number of brokered home loans are at record highs.

A lot of this activity has come through first home buyers due to the HomeBuilder grant and the extension of the first home owner’s grant. Therefore, developers are getting a lot of land out as quickly as they can.

With the Cash Rate at 0.1 percent, the time to cash in with a home or business loan is now. The Cash Rate is the rate that the Reserve Bank sets for banks to borrow and money between themselves. The banks then have a margin that goes on top of that which is basically the cost to run their business and you end up with the interest rate that you - the borrower - is paying.

The Reserve Bank Governor said that rate likely won’t increase in the next three years. This provides a bit more certainty for people so that they can go out and borrow and invest with some more freedom.

Chris says at the moment if you were looking at a low fixed rate below 2 percent, you should want an extended time at that rate. If you looked at a three to four year fixed rate, by the time you come out of it into a variable rate it may have increased and may continue to do so.