LAST TUESDAY, the RBA left the cash rate on hold — much to the surprise of most pundits. And yet, only the week before, that’s exactly what I suggest would happened.
You might also remember I suggested that you lock in a fixed rate mortgage — because it was then about 1% below the variable mortgage rate.
Many scoffed, and said that rates will continue to come down. Well, the past 7 days have certainly put paid to that theory — with the big 4 Banks raising their rates, quite out of step with the RBA.
Fortunately, a number of my clients did listen and took advantage of this favourable disparity between fixed and variable loan rates … which is something you may not see again, for another 15-20 years.
Fixed rates will now start to climb; but if you’re quick, you can still obtain a fairly good rate — when compared with where mortgage rates will be in a few years time.
Australia’s High Dollar
While it has helped to keep inflation down, our strong dollar is said to be detrimental for everyone from miners to retailers.
However, if you delve a little deeper, the miners appear to be surviving alright — perhaps because the high dollar is keeping fuel and machinery costs down. And also making their overseas labour costs cheaper.
Take away the miners, and you soon realise that Australia is predominantly a service economy. Therefore, apart from the retailers and tourism, having a high dollar effectively means cheaper imports for everyone else.
What about overall Confidence?
With the deal having now been approved on Greek debt, things will begin to settle down within the euro zone. And with every report, the US economy continues to improve.
As a result, you saw the results of this reflected in buoyant share markets yesterday, and overnight.
Bottom Line: You need to remember that Australia’s current high level of savings has been accumulated week by week, and month by month. In the process, it has clearly dented retail spending; and had a short-term effect upon consumer confidence.
But as a Commercial property investor, you should take a longer-term view of things. And you need to realise that, with an improvement in the global scene, it won’t be long before those accumulated funds will be spent quickly … and as lump sums.
So, make sure you’re prepared.