Meanwhile, the variable home loans allow borrowers to pay in varied amounts according to the changes of the official cash rate. Since market conditions change from time to time, more borrowers opt for this loan in hopes of low repayments.

Likewise, the interest rate of a variable home loan will go up if the RBA official cash rate increases. Since a variable loan has more flexible features as compared to a fixed loan, variable loans usually have higher interest rates to shoulder these features.

If you cannot decide on one home loan, you can also have a split home loan which has the characteristics of both a fixed and variable home loan. With a split loan, you can pay part of your loan on a fixed rate and the other part on a variable rate. This type of home loan makes repayment faster as well.

On the other hand, interest only home loans let you pay only the interest rate of the home loan for a period of one to five years. After which, you must start paying off the principal and repayments of the loan amount.

Interest-only home loans can initially cut the expenses needed when purchasing a residential property. This cut then allows you to use the money saved towards other expenses. On the downside, lenders will weigh your capacity to shoulder the loan through your repayments and this can limit your chances of borrowing more funds.

Honeymoon home loans start with a low starting interest rate for a honeymoon period that usually lasts for six months to one year. After which, the rate reverts to normal rates and the principal amount must be paid off. First home buyers and businesses that are starting up opt for this deal to give them more savings in the term’s initial years.

Meanwhile, a no deposit home loan allows you to borrow the full amount of the property’s purchase price. Finally, an equity home loan or Line of Credit home loan has a continuing pre-set limit that is fixed. The money that is saved in the line of credit loan can be used for shares and renovations of a personal or investment property. However, its interest rate is higher as compared to the standard rate and this deal can bring a lot of financial problems if it is misused.

Some are also investing in non-residential properties such as syndicates and trusts. Investing in Property though is more attractive to investors as it is a less less volatile investment than shares and  a safer way to create wealth. The value of property is more likely to stay the same for longer periods, while other assets are more volatile and more likely to decline in value.

Property investments also have the potential to create capital growth and rental income at the same time. They also offer tax advantages through negative gearing. It is important to note though that these investments have no guarantees. Property prices can likely decrease as well as demand for rental properties, it is also difficult to find tenants who will consistently pay on time and who will take care of your property.

Property investors must be aware of interest rate changes and the effect the changes in interest rates will have on their net return on their property if they wish to sell. Investors must also be confident that earnings from their property can match earnings had they invested in shares.

If you do not have the direct budget to buy a property, you can invest your money in managed funds that have a property focus. You can also invest in property syndicates or listed property trusts for industrial, commercial and residential properties.

More investors have had residential properties dominate direct their investment portfolio. However, direct property investments only count for ten percent of investment portfolios.

The two types of home loans according to interest rate progression are the fixed home loan and the variable home loan. Judging by its name, the fixed home loan gives you a stable payment mode no matter what happens with the market interest rate. However, in the event that the market interest goes lower, your loan stays at a higher rate.

However, your loan stays at a higher rate if the market interest goes lower. Also, a fixed home loan is not open to flexible repayments. There are times that the borrower will be penalized if an advanced repayment is made.

On the other hand, the variable home loan allows a borrower to pay in varied amounts for the deal’s duration. More borrowers opt for this option since market conditions change from time to time. The variable home loan interest rate is heavily dependent on the market interest rate so repayments can either be high or low.
You can also have a loan with fixed and variable characteristics. For this, you sign up for a split home loan. With this deal, you can pay part of your loan via a fixed rate and another through variable conditions. This type of home loan makes repayment faster too. However, this type of loan is vulnerable to both disadvantages that a fixed and a flexible home loan might bring.

Meanwhile, honeymoon home loans are suitable for families or businesses that are starting up. This type of loan has a low starting interest rate for a year or two. After which, the rate reverts to standard interest rates. It is presumed that you have saved in the grace period which makes you able to pay the standard rate afterwards.

There is also a no deposit home loan which allows you to borrow the full amount of the house’s purchase price. Also, this option also makes you eligible for the $7,000 First Home Owners Grant. However, this deal entails additional stamp duty fees and conveyancing charges.

Self-employed borrowers or people with poor credit ratings can also avail of a non-conforming home loan. For this type of loan, a customer must only prove that he can satisfy the monthly repayment of the loan through a proof of income.

If you are in the process of selling your old property and buying a new one, you can apply for a bridging or relocation loan for a smooth transition of the home loans. This is offered for a maximum period of six months at a standard variable rate. Lenders would also require a significant equity value from the property for this loan to be approved.

There are also reverse mortgages for customers aged 60 and above. In this kind of set-up, applicants can borrow up to 45 per cent of the value of their home with funds advanced in one payment on settlement, or as needed and no repayments are needed over the life of the loan.

And finally, an equity home loan or Line of Credit home loan has a continuing pre-set limit that is fixed. Money generated from this loan can be used for shares and renovations of a personal or an investment property. However, its interest rate is higher as compared to the standard rate.

Speak with an eChoice home loan consultant today to learn more about the home loan options available to you – Click Here

Experts predicted this forecast due to rising interest rates and the First Home Owner Grant removal. These developments will have a big impact on the lower end properties. However, middle and upper end properties will get a boost from buyer trading, population, immigration growth and a steady economy.

Experts also foresee that the areas that will have the highest property price hikes are the places where the First Home Owner Grant has been more popular. This development is possible due to the domino effect that it can bring to the market.

John Edwards of the property research company Residex stated that a steady growth is possible for the $500,000-$600,000 properties in Melbourne and Sydney for the First Home Owner Grant has become popular in these cities.
He also predicted that property prices in Melbourne will go up by around six to seven per cent and this can make rental prices rise as well. Edwards also added that since that the value of the lower end properties grew 15 per cent in 2009, owners can possibly use that equity to trade up for middle end properties.

Meanwhile, Matthew Bell of the Australian Property Monitors predicted that the prices of the middle end properties throughout the country will go up by seven to ten per cent. He also added that once interest rates reach the 7.5 – 8 per cent mark, it will not be a negative aspect in the escalating property values.

Bell pointed out that the property price fall from March 2008 to March 2009 is due to the global financial crisis and not on the rates.
On the other hand, AMP Capital Investors Chief Economist Shane Oliver stated that property prices have already been high for six to nine months and that it is difficult to raise property prices for it can take out the affordability of some properties.

Swift markets movements began on the 1st of December after the RBA made their meeting’s minutes public. These movements were also backed by RBA Deputy Governor Ric Battellino’s speech.
Battellino stated that rates can maintain its current rate until February 2010 because the positive stance of the monetary policy puts the rates at normal. This comment of his during the Australasian Finance & Banking Conference in Sydney shocked a lot of market movers and as a result, this could bring the Australian dollar under the US$90 level.

He also claimed that the monetary policy is back at normal because the current level of deposit and lending rates for housing and business brought the cash rate to a pre-crisis level of 4.75 per cent.
Battellino’s remarks were delivered an hour after an Australian Bureau of Statistics report showed that economic growth during the September quarter is lower than expected. This slow down is due to the fall of the export market though imports are rising. However, household demands and businesses investment and equipment purchasing are going strong.

Also, the figure of the financial market that believes that another 25-basis point increase is imminent in February was reduced from 67 to 45 per cent.
Because of these developments, ANZ acting chief economist Warren Hogan said that the slow GDP growth shows that interest rates are not in neutral ground and that measures must be done to bring it back. He also added that Battellino’s remarks can cause a road block to gains via the cash rate in early 2010.

Hogan also stated that the emergency level of interest rates is now gone and that the policy for it will be tailor-fit to current conditions. On the other hand, Westpac chief executive Gail Kelly told after their annual meeting that the RBA might carefully raise rates in 2010 though the cash rate level is not within normalcy.
However, Westpac chairman Ted Evans commented that the road to recovery is still long. He also defended Westpac’s move to raise rates higher than RBA’s. Evans reasoned that since interest rates are rising, it is just right to increase costs to prevent a potential meltdown of their bank and of the Australian economic and financial system.

Evans also added that Westpac has absorbed rate increases rather than let their borrowers feel its effects and that it is unfair to subsidize home loan rates by holding down deposit rates and raising business rates.

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When shopping for a home loan it can be easy to get carried away with advertisements and television commercials that pitch various financial products from big banks and lenders without doing any real research. Here are some quick and easy tips for finding the very best interest only home loan rates so that you can not only find a great rate but feel secure in knowing that you did your homework.

#1 It’s All About the Numbers – Kind Of

The absolute most important thing to look for is the best interest rate – right?

Yes, that is true to a certain degree but another thing to consider is the customer service of the lender and the requirements for getting approved for the loan. Just like an instant approval credit card offer typically will return a yes/no decision almost immediately and there is not as much need for upfront customer service the home loan shopping process is much different because the approval process takes so much longer.

Getting a home loan is typically a very time sensitive issue and so even if you think that you can get a loan with a quarter point less in interest but it may take 3 months to get approved for the loan and the customer service is horrible then it will probably make sense to choose the lender with the quick and efficient loan closing process that has great customer service even if you have to settle for a slightly higher interest rate.

#2 Work with a Knowledgeable Broker

The difference between a good mortgage broker and a bad mortgage broker make themselves known very quickly when you are pressed for time and want to get qualified for your loan in a hurry. Ask for referrals to find the best mortgage broker and then prequalify the broker by asking them about their experience.

#3 Compare Rates from Many Sources

Don’t make the mistake of jumping at the first quoted rate that you see. Do your research and compare rates from many different sources before you decide to submit an application. Get started finding the best interest only home loan rates today!

Interest Rate Calculation

The Reserve Bank of Australia officially lifted interest rates for the third consecutive month to 3.75 per cent. This new increase was implemented despite the fears about Dubai’s debt that can have a toll on the global economy. This is the largest interest rate hike since 1994 when the cash rate gained three percent in five months.

For the last three months, 75 basis points have been added to the official cash rate. This recent development means that $46 will be added to an average mortgage of $300,000. In contrary, the interest rate from April to October was at a 49-year-low 3 per cent.
RBA Governor Glenn Stevens announced in his policy statement that the new interest rate pushed through because of the recovering global economy. Stevens added that since the worst economic days have passed, the RBA board has decided to gradually decrease the monetary stimulus that was implemented during the crisis.

Stevens also added that this recent change will sustain economic growth and will keep inflation consistent. However, Treasurer Wayne Swan said that this latest rise will have a huge effect on the family budget. Swan also mentioned that in the long haul, rates will not stay within emergency low levels.

Meanwhile, Business SA thinks that the recent rise was done too soon. Business SA chief executive Peter Vaughan stated that this is not what businesses and consumers need during the Christmas season. He also claimed that the RBA should wait until the economy has stabilized before taking the spending money of consumers.

Vaughan added that this premature rise can take a toll on customer sentiment and it can reverse the plans to help families and businesses go through the economic downfall.

Due to this recent development, Westpac already announced a 0.45 per cent increase to their variable home loan rate, bringing it to 6.76 per cent. Other major banks are reviewing their rates to decide whether an increase is needed. Currently, ANZ has a 6.31 per cent rate while NAB and CBA’s is at 6.24 per cent.

Rates are likely to go up by 25 basis points to potentially peg the interest rate to 3.75 per cent.
Should it push through, this will be the first time that the RBA will increase rates for three straight months. However, ANZ chief economist Warren Hogan claimed that this condition is favourable despite the situation in Dubai.
He also added that though there is volatility in the financial markets, the local economy is stable and that the economic data for November registers positive marks.
Hogan also stated that the exposure of Australia’s local market to Dubai is minimal and the losses that are being incurred should not be a concern and that it won’t spark a second global financial meltdown.
After this meeting, the RBA board will meet next on February wherein another interest rate hike is expected.

After the two 25-basis point rise in October and December, the financial market is registering a 75 per cent chance of another 25-basis point cash rate increase. According to a survey by the National Australia Bank, the index for business conditions jumped from nine points to 12. This rise is NAB’s highest level in 21 months.

Also, the NAB business confidence survey rose by two points in October to bring their index level to 16. These quick jumps bridge the gap of escalating confidence levels that businesses are feeling in recent months.

Other parts of the condition index improved as well with profits up nine points to bring its index level to 13. Also, trading went up seven points and employment hiked eight points to peg their index levels at 13 and seven respectively.

These positive outcomes were registered despite the interest rate hikes in October. Because of which, business must be well aware of the possibility of another rate increase in November by the time they were surveyed in late October.

As an effect of these developments, ANZ senior economist Shane Lee said that this survey adds weight to the discussions that RBA will tighten its rates next month.

However, the forward orders index fell from seven points to three. Because of this, Commonwealth Securities economist Savanth Sebastian said that this development suggests that businesses might not increase their production in the coming months. He also added that given ongoing global financial crisis, it would be better for the RBA to raise the cash rate next year.

Sebastian also added that the employment and capital expenditure date at month’s end will determine whether a December rate increase is imminent. In relation to this, economists expect a 5.8 per cent unemployment rate for October after unexpectedly dropping from the 5.7 per cent level in September.

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