Fixed Rate or Variable Rate Home Loans - Your Choices
If you are on a variable rate home loan, please consider
the option of capping (fixing) your mortgage rate now.
Home loan interest rates may move up in the next 12 months. The home loans interest rate cycle is best understood by looking at what drives the interest rate cycle and therefore what to expect in the future.
What the Reserve Bank thinks about rates: click here
Why variable rates vary: click here
Home
loan interest rates are at the lowest levels for 2 decades
and have been basically on hold for almost a year. The
solid Australian economic growth has seen real wage
rises plus property increase in value, but without any
real increase in inflation. Now add to this mix the
huge oil price increases and you may see inflation start
to bite and this may fuel an increase in interest rates:
the Reserve Bank has signalled it will probably raise
rates in 2005.
The Reserve, which sets the general level of variable interest rates to keep the economy growing steadily, reckons it needs to keep a lid on household borrowing and guard against rising inflation.
A recent rebound in the global economic growth, coupled with oil price rises now make a rate rise much more likely.
The good news is that analysts expect only a small rate rise – probably 4 rises over 12 months of 25 basis points or about 0.25 per cent more on a typical home loan. A 0.25 per cent rate rise would add $16 in monthly repayments for every $10,000 of debt. A total of 1 per cent rate rise would add $64 in monthly repayments for every $10,000 of debt.
Signs that the long property boom is slowing may further limit the amount of further rate rises.
- The Reserve Bank has kept the cash rate on hold since January as it weighs up its choices. It's being influenced by:
- Whether last year’s two 0.25 per cent rate rises were sufficient to slow booming personal debt and take some of the heat out of the property market.
- What is happening with interest rates in the USA and Europe.
- The rate of economic growth here and overseas.
- Inflationary impact of oil price increases as the cost of energy feeds into the whole economy
- What impact higher rates would have on business investment and confidence.
When you are ready to apply for a mortgage or a refinance
package, the Home Loan Club will help you.
Please complete the no obligation online enquiry form.
Home Loan Information Index
- What the Reserve Bank thinks about rates: click here
- Why variable rates vary: click here
- Tips for beating home loan interest rate increases
