It is very likely we are going to see an interest rate reduction by the RBA this year. As we approached the end of 2018 it became apparent that the economy was starting to slow. This was highlighted by the reduction in property values in Melbourne and Sydney.
Below is a graph of interest rates over the past 10 years. As can be seen the trend has been down over this period and we have had a period of record low interest rates. Please note the graph is the rate before applying the customer margin which is normally somewhere between 1% and 3%.
Interestingly we are starting to see fixed rates trend lower. Variable rates are reasonable flat with a slight increase in some scenarios which the bank justify on the basis of increased funding costs.
Domestic factors to consider this year that may have an impact on immediate and long term rates will be the findings of the Royal Commission and the Federal election.
If you haven’t fixed part of your debt yet, it is recommended to consider your options available.
Please remember that your banker wants to give you the best finance deal possible. To achieve this you must help them by providing adequate and appropriate information.
Your overall interest rate is made up of the cost of funds to the bank plus a margin based on the perceived and real risk of your business. By providing the appropriate, up to date information you can reduce the risk assessment and achieve a better overall finance package.
The information that a banker wants to see is a basic business plan, cashflow forecasts and up to date financial information. Analysis and review of the past season results, what worked well and what didn’t and future strategies helps a lender better understand what you are all about and assists in getting the best overall finance package.
If you would like further information or assistance on accessing the best finance package available for your situation please do not hesitate to contact Chris Mulcahy.