Loan, Card Rates Rise
Sun Herald
Sunday January 2, 2000
THE bubbly will barely have popped before lenders increase interest rates on home loans and credit cards.
The new year will also bring a showdown between the sharemarket and the dollar because resources stocks are booming on what has been only a mediocre rise in commodity prices.
But more globally inspired corporate takeovers and mergers are expected to keep the rest of the sharemarket, which closed the year at a record, on the boil as banking, retail, telecommunications and media stocks ride the technology-driven economic boom.
Lenders warn that mortgage rates will almost certainly climb 0.5 per cent or $33 a month on a $100,000 home loan as early as next month and even by up to 2pc before the year is out.
``A 0.5pc rise is inevitable in the first or second month of the new year," said John Symond, managing director of Aussie Home Loans. Mr Symond said the money markets were assuming a 0.75pc rise in official rates.
But financial advisers say don't fix your mortgage. Three and five-year rates are higher than most economists predict the variable rate will rise to.
On the other hand, if you're about to borrow, honeymoon rates are as low as 4.8pc with Illawarra.
Investors also should avoid term deposits. Last year's fad of income securities, a hybrid debt-based share, produced instant paper losses for original investors but now offer high yields.
These automatically pay more as interest rates rise because they are based on the bank bill rate plus a margin of up to 2pc in the case of Colonial State Bank and Woolworths securities, yielding almost 8pc. But you can only get your original investment back by selling in the market which has so far shown a distinct dislike for them.
Westpac last week set the ball rolling for increases in credit card rates. Expect the other banks to follow with at least a 0.25pc rise just as the December statement falls due later this month.
Chris Gosselin, of the independent analysts Market Faxts, warned borrowers to pay the entire amount off by the due date if your card has interest-free days.
If you have trouble repaying, tell your lender, which can make special arrangements. Even a personal loan could cut your interest bill by 7pc.
The Commonwealth Bank's commodity price index rose almost 10pc over the year but, allowing for the rise in the dollar over the same time, this translates to just a 3.5pc increase to exporters.
Either way, the recovery in resources stocks has so far exceeded the rise in commodity prices.
Markets Week Latest New York Up 91 Up 44 close 11,497.1 London Up 124 Up 94 close 6,930.2 Tokyo Up 349 Up 124 close 18,934.3 Sydney Up 17 Up 11 close 3,152.5 The dollar Up 0.98? Up US65.37?
© 2000 Sun Herald
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