A Tough Year?

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It has been a tough year for mortgage holders but the good news is there are signs of better times ahead.

Predictions that interest rates will rise again before the end of the year have fallen, with the Reserve Bank’s increasing confidence that the economy is slowing. At each Reserve Bank meeting the Board undertakes a health check of the economy using key indicators like job figures, wage activity, household spending, retail sales and commodity prices. Recent health checks have shown a cooling of economic activity and domestic demand, indicating that the earlier rate hikes have begun to work their way through the Australian economy.

Some experts like leading CommSec economist, Craig James, go one step further in claiming that Australians are better off than it appears. He found that while rate rises, higher petrol prices and a falling stock market have been hurting our hip pocket, some of these costs have been covered by years of wage increases and tax cuts.

A recent CommSec analysis of wage, tax and cost of living data has revealed that a person who took out an average home loan six years ago and was earning the average wage, would today be ahead by more than $425 a month. Even those who took out mortgages more than three years ago are likely to be in front despite numerous rate hikes and the increased cost of living.

The outlook in the US is not so rosy. Last year’s subprime mortgage crisis has led the way to a depressed housing market, with mortgage firms, Fannie Mae and Freddie Mac, almost becoming the latest victims.

The collapse of these giant firms would present a serious threat to the US economy, which would have a flow-on effect in the Australian economy via lower commodity prices, lower demand for our exports and higher prices for funds. Given the severity of the situation, a Bush Administration rescue is in place, which it is thought will put a lid on the problem, preventing further destabilising of the economy.

In these times of economic uncertainty, it is all the more important to make a thorough and considered decision when a funding need arises. I am well experienced in arranging loans and will use this expertise to seek out a range of suitable financing options for you within the current economic climate.