In Australia, most people overlook the presence of the Reserve Bank – but the truth is that this huge organisation actually governs what lesser banks and lenders are able to do as far as their lending policies go. Although most mortgage applicants will go directly to banks to apply for a loan on their new home, it’s not actually these establishments that have the final say on costs and fees.
What Affects Mortgage Interest Rates?
There are literally more than a dozen unique factors that can take their toll on interest rates proposed by banks and lenders. Some of the most prominent include the state of the economy (which isn’t a huge concern in countries like Australia), as well as the time of year and the amount of people borrowing cash.
If the Reserve Bank of Australia is forced to invest more money into particular activities within the country, then the likelihood of rates increasing will be far more substantial. If they are able to reduce spending, then they can extend these benefits to banks throughout the country. So, why don’t all lenders have the same rates?
Well, it all comes down to banks being individual businesses. Each one will have its own owner, or set of owners, so they will also possess their own strategies and agendas. The Reserve Bank will simply introduce protocols to ensure that whatever the rates might be, they are relevant to the current state of the market.
So, say for example that the RB dictates that rates can fall to between 2% and 3%, it will be down to the individual banks to decide where within that margin they fall. This is why some lending agencies will prioritise keeping their rates as low (and therefore competitive) as possible, whilst others might want to take advantage of the higher rate potential while they are available.
In either event it can make a huge amount of difference to have rates compared by an expert, especially as these types of mortgage brokers will often be able to predict fluctuations, or even negotiate cheaper terms with banks in general.