Home owners and property investors have watched the big four banks with disgust this week as interest rates on variable home loans have risen despite the Reserve Bank of Australia's (RBA) decision to leave the cash rate on hold at 4.25% when it met on February 7.
Prime Minister Julia Gillard has urged bank customers to 'walk down the road' after calling the actions of the major banks 'reprehensible' with the government saying there is no legitimate reason for banks to increase interest rates.
The major banks are citing increased borrowing costs and the RBA has supported this statement with the Assistant Governor, Guy Debelle, saying 'global repricing of bank debt has clearly affected the Australian banks' wholesale funding costs'.
Ian Narev, Commonwealth Bank's Chief Executive Officer, has stated that 'people shouldn't expect their mortgage rates to go up and down, strictly speaking, in line with the official cash rate'.
The actions of the banks have led to predictions that mortgage holders will switch banks. According to Steve Munchenberg, Chief Executive of the Australian Bankers Association, 'last year about one in three people switched (banks) and that was the top end of the historical range and this year could be even higher'.
Mortgage holders are encouraged to undertake a 'mortgage health check' and understand if they really have the right mortgage product to meet their needs at the lowest possible cost. With the number of products on the market a financial specialist is best placed to undertake this 'health check'.
Property investors are reminded that any increase in interest they pay for their investment loan is a tax deductable expense and can work to increase their cash flow under certain circumstances.
ParkTrent professionals are available to provide a mortgage health check and to assist investors in ensuring they benefit from all eligible tax deductions. Call 1800 652 224 or email us via contact@parktrent.com.au
