Hello all,

I hope you have had a great holiday period and are getting stuck into 2008 already.

Being my first day back on deck today I was expecting it to be reasonably quiet – it was far from it actually!

I thought I would take this opportunity to touch base with you in relation to some of the major banks increasing variable interest rates beyond official RBA (Reserve Bank of Australia) increases.

You may have already heard that the NAB have increased their variable rates by 0.12%pa and the ANZ this afternoon announced that they are increasing their rates by 0.2%pa as of Wednesday. (see attached article sourced today from The Australian online)

Obviously this is quite controversial given the RBA increases of last year, record bank profits and the likelihood of at least one further increase this year. The perception by many is that our large Australian banks source lending predominately from deposits rather than from bonds raised on various markets around the world – the latter of which is highly linked to the issues in the US.

Overall it is a complicated set of circumstances but you should expect that there will be much media speculation about the legitimacy of these increases and it will be interesting to see how it pans out in the coming months.

Bear in mind that there could well be one or two banks who could be positioned to weather the current environment and possibly creating an opportunity for many people to potentially refinance to them and save money. Rest assured I will keep you up to date as more information comes to hand if this may be the case.

Nobody quite knows the length or extent that the US sub-prime crisis will continue to have on our local interest rates but hopefully it won’t be too long. The Australian banking system is exceptionally well regulated as a whole and competitive forces are likely to play a positive part for consumers in the longer term.

What does this means to you?

Arguably on a positive note, a further rise in official RBA interest rates in February has been reduced because of this independent bank action. But this more likely means only one more interest rate rise from the RBA in 2008 rather than two.

Of course if you have a fixed rate portion on your loan(s) this volatility will not affect you. Otherwise in most circumstances we should have already set you up on a top tier discount of at least 0.6%pa off the standard variable rate (ie discounted to about 7.97%pa or better). This means it is highly likely your mortgage will remain one of the most competitive products on the market.

Of course my service as your personal broker is ongoing so please feel free to contact me directly at any time to discuss any queries you have in relation to arranging a fixed rate component or arranging a quick free health check of your current finance structure.

Contributed by Clinton L. Waters from More, Rosh & Waters, a mortgage brokering firm based in Melbourne, Victoria, Australia.