Where are interest rates heading?

Can I have a savings account with a different bank
High interest online savings accounts are usually linked to a transaction account to move money in and out. However most savings accounts do not require the linked transaction account to be with the same institution. You can have a savings account with another bank or credit union and link it to your existing transaction account.

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One bank takes parental leave into consideration
Westpac has announced that new parents will now have their paid parental leave and return to work income recognised when they apply for a mortgage.
Today’s announcement is a positive change that will benefit many current and future families, said Westpac’s director of women’s markets Ainslie van Onselen.
Recognising paid parental leave and back to work income is about creating financial choice, whether that be renovating, upgrading or buying a new property.

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You don’t need to give up coffee to save money
Personal finance advisor David Bach says if you skip coffee every morning and invest that money instead, you’ll be a millionaire by retirement. Another personal finance author, Helaine Olen, said the maths on this concept doesn’t add up. At $5 expenditure every single day over 30 years and assuming a generous eight per cent annual return for investing that money, the potential interest comes out to around $171,000 on top of $54,000 in coffee savings. That’s not enough to retire on.
The broader lesson should be that reducing expenses overall is better. Opt for a cheaper house, cheaper TV deal or cut big expenses.

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How does a mortgage offset account work?
A mortgage offset account is a daily transaction banking account or savings account that is linked to a home loan. The balance in the account is an offset against the balance owing on the home loan, lowering the interest payable.
The Reserve Bank of Australia reports that offset and redraw facilities now hold 17 per cent of the total outstanding mortgage debt in Australia. That is an average of two and half years of repayments.

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How much can I save by switching home loans?
An average home loan borrower with a $300,000, 30 year home loan is paying, on average, a home loan rate of 4.95 per cent p.a.
If that borrower switched to the lowest interest rate now available in the market, 3.63 per cent, they would save about $83,000 over the life of the loan. The annual savings would be $2800 per year of about $232 per month.

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What is the outlook for interest rates?
The Reserve Bank of Australia board was content to keep official interest rates on hold for June at the current setting of 1.75 per cent.
The RBA governor Glenn Stevens said economic growth and inflation were both lower and expected to remain low. Economists are still expecting lower rates in 2016.
Tom Kennedy, economist at JP Morgan, is predicting a rate cut in August 2016 and again in early 2017.

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Where are interest rates heading?
Low inflation looks like it is here to stay for a long time so low interest rates are likely to also remain in place for the foreseeable future. Currently the Reserve Bank of Australia has official cash interest rates set at 1.75 per cent. Many economists are predicting at least one more rate cut this year. The lowest retail mortgage interest rates are now below 4 per cent.

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