Would You Like a 2.9% Home Loan?

Graeme Salt

I have come back from a month’s holidays in Europe. Much as I love that continent with all its culture and heritage, I am really glad that I live in Australia.


Over the years, we have all been aware of the problems the western world has had to deal with and the emergency measures that governments and central banks in the US, Eurozone and UK have had to implement. But the reality of it did not dawn on me until I was in a bar in France with one of my best mates.


My mate Pierre, and his wife Virginie, have just bought a new house. Pierre told me that they have been able to fix their home loan at 2.9 per cent for 12 years! I almost fell off my bar stool when he told me - the equivalent in Australia is 6.6 per cent.


Once I had verified that we had both only consumed a couple of glasses of red each (rather than a couple of bottles), I got to understand that things are pretty desperate over there and why we are better off in Australia (even with low rates). This year, the Eurozone economy may grow by 1.4 per cent at best (as opposed to 2.3 per cent which is occurring in Australia). Europe’s unemployment level is 12.2 per cent (Australia 5.8 per cent). With an economy like this, it’s hardly surprising that interest rates are desperately low.


We all know that the Australian economy is at a crossroads; the mining boom is unwinding and we are unsure how much other sections of the economy will pick up enough to take the slack. But we are surely unlikely to end with 12.2 per cent unemployment.


I am tending to get variable rate of about 4.7 per cent for my clients at the moment. Sure it is higher than what Pierre and Virginie are paying, but I would rather my clients lived in an economy which was not so lacking in confidence that it needed emergency care.


Graeme Salt can be contacted on 02 9922 5055