Kin’s Money

Today the Daily Telegraph is reporting Wizard Home Loans to be the first lender to drop it’s variable home loan rate by 0.25%.

The Reserve Bank’s meeting this Tuesday is expected to cut rates, and now several lenders have promised to pass on any cut in official interest rates.

Mr Bouris, Chairman of Wizard Home Loans said:

“It’s a risk,… while [other banks] were very quick to hike their rates independently to the RBA when funding costs were increasing earlier this year, they are now just stalling - waiting until an announcement by the RBA.”

Which begs the question, will wizard also drop their rates by the same amount as any cut on Tuesday? Or will it claim this as its cut, running the risk of appearing hypocritical.

This news is good for homeowners, but not so much for savers. While several banks have passed on interest rate rises as higher rates on savings accounts, they seem to be quick to cut them alongside Reserve Bank cuts, while rising loan rates independent of official rises and not raising savings rates. And it seems that this trend is set to continue with at least one bank already cutting fixed interest savings accounts in the last week.

On a personal note, I’m looking forward to any rate cut, as that will help us pay our mortgage on our block of land off quicker. We also have an offset situation, and redraw, so all our surplus funds sit there saving us interest every day.

What are your thoughts? Do you have mortgages or savings? Are you looking forward to rate cuts?

This week the National Australia Bank (NAB) have committed to matching any cut in official interest rates next month. So far they are the only bank to do so, despite continued warnings from the government. Apparently the banks see the government as a toothless tiger in this scenario, and feel (probably quite rightly) that there is nothing the government could actually do that would encourage them to follow the NAB’s lead.

If your bank does pass on any interest rate cuts made next month, it is important to remember that those cuts will not necessarily pass on to you unless you ask for it. From the Canberra Times today:

MORTGAGE holders struggling with the rising cost of living will have to apply individually to their bank to have their repayments reduced, even if the lender passes on an interest rate cut.

This is because most Australian mortgage holders choose to make repayments in excess of the minimum required and these repayments do not automatically change when interest rates do.

So if you’re holding your breath for next months expected interest rate cut, remember to contact your bank and apply to reduce your repayment. Or, you could leave your repayments as they are, and simply pay off your loan quicker.

Personal Finance is not like an event at the Olympics. When trying to connect the two, I could only think about the process a city goes through in hosting the Olympics. It is not an event you can train for for 4 years, and is over in 10 seconds, 15 minutes, or even a couple of hours. It is a process that can take many years. And I thought about personal finance in relation to the 2024 Games in Brisbane (yet to be determined )

1. Initial Decision - Brisbane has not yet taken the decision to apply for the 2024 Olympics. Just as many people have not yet made the decision to master their personal finances.
2. Investigation - For Brisbane this means determining what will be required to apply for the games, and what will be needed to host the games. Investigating your personal finances is the first step to mastering them. What is the situation? Is it dire? Good? If you don’t know, you have nothing to work with.
3. Making a plan - When Brisbane has decided what is needed to apply for and host the games, it can begin to make a plan for the bidding, and hosting of the games. When you know the state of your personal finances, you can draw up a plan for how you’re going to master them. This may include a budget, a savings plan, a retirement plan, an investment plan. Remember too that these plans are not set in stone.
4. Set the plan in motion - at this point it’s worth noting that the 2024 games host city will not be decided until 2017. That’s right, 9 years from now. Personal finance is not a sprint! By beginning to act on the plan now, Brisbane will have 9 years to determine if the plan is working, and what needs to change for it to work properly. If your budget is not working, change it! Only by acting on the plan can you see its effectiveness. And don’t get too attached to the plan that you’re not open to change. Brisbane may find in a couple of years that they won’t be ready for the 2024 games, and decide instead to try for the 2028 games.
5. Be open to change - Just as the host of the 2024 games is not yet set, your plans are not set in stone. Priorities change, your situation changes. Interest rates go up, or down, food prices go up, fuel goes up. A budget is not a pice of paper, but a living idea. Some people budget each pay, each month. Don’t be afraid to change your plan.
6. Set targets along the way - Clearly 16 years away is a long time, if Brisbane doesn’t measure how they’re going in that time they won’t know if they’re on target. Similarly, unless you have shorter and medium term goals, you won’t be able to measure your success.
7. Enjoy the journey - That may sound like a bit of a dumb thing to say about personal finance, but like life, financial management is a journey, not a destination. If it was all work and no fun, no one would want to host the Olympics. Think of ways to make it fun - reward yourself, share the load, get the family involved.