How often does the RBA change interest rates?
The reason I’m asking is because if I’d have to send out paperwork to the wrapee each time there is a change in the interest rates, it would be rather troublesome. For instance if the RBA decided to change the rate every month (extreme example) I’d have to send out paperwork every month!
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Cheers
CamilliaHello Camilla,
I thought that I would do some research on this topic for you…
The Reserve Bank
The Reserve Bank of Australia is an independent organisation to government and is charged with the responsibility of settling monetary policy.
Monetary policy is the way that an economy can be stimulated or restrained by affecting the price of money. In times when spending needs to be constrained then the cost of money increases – when stimulation is needed, the price of money falls.
The Reserve Bank of Australia controls monetary policy via setting a key benchmark interest rate called the ‘Cash Rate’ – which is the rate generally applied on overnight money markets.
Lenders then take the base case rate and add on a margin when setting home loan interest rates… so as the Reserve Bank changes the cash rate, so too do lenders who price their loan products at the cash rate + % margin.
An excellent link to show how the cash rate has moved since January 1990 is: http://www.rba.gov.au/Statistics/cashrate_target.html
Changes To Interest Rates
Movements in interest rates must be ratified by the Reserve Bank of Australia Board. The Board consists of nine members and meets generally 11 times per annum on the first Tuesday of each month.
Monetary policy is discussed at these meetings and movements in interest rates are generally announced on the day after the meeting.
Once a change is announced then it may take a few weeks for lenders to pass on the movement as they must also manage their internal credit risk and mix of loans:deposits.
Advising Wrap Clients
Provided you run your wraps under a system, advising of changes to interest rates is not a administration problem at all… it’s just a standard letter to each wrap client. Less than ten minutes work.
I hope this has helped.
Bye
Steve McKnight
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Thanks for the info Steve! You’ve certainly got a way of putting things in a clear and easy to understand manner [
]Another question[?] if you could kindly offer some advice:
Is it feasible to wrap a property from a different state – can everything be done over the phone/fax? Or if I wanted to wrap a property ina town 6 hours away from where I live, would it be possible to do so without having to drive there frequently? If this is not advisable, what would your reasons be and are there ways to overcome them?Many thanks!!
C.Hi,
You can do absolutely anything that you want when you have the vision and energy to do it.
You can certainly do wraps out of town, but only when you have the systems and procedures behind you.
The system that I use is well explained in my Wrap Library.
Regards
Steve McKnight
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Thanx Steve! [
] I would say then, a better question would be is it feasible for a first wrap to be done out of town – is it too risky, even with a “borrowed”(tried and tested and 99% foolproof I’m sure) system?[
]C.Edited by – [email protected] on 14/08/2002 1:04:21 PM
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]C.The topic ‘Interest rate changes’ is closed to new replies.
