Several of the heavy hitters such as CBA, Westpac and ING have all ramped up their interest rates despite rumours of further interest rate cuts by the RBA. However some Analysts are tipping the scales towards the Reserve Bank of Australia decreasing rates over the coming months, indicating there is uncertainty with the direction of interest rates heading into the New Year. According to The Sydney Morning Herald, market experts tip that this could create a snowball effect of rate increases with other major banks set to follow the trend.
“Property investors who take a Westpac five-year fixed rate mortgage from next week will see an increase of 0.6 percentage points to 4.59 per cent - the biggest of the increases.”
As fixed rates are fixed to the initial rate agreed upon, those who already have a fixed rate loan will remain unaffected, but those with variable rates face inevitable uncertainty.
“Banks and lenders are attributing these recent increases to higher international funding costs, due to uncertainty in global debt markets following the outcome of the US election.” – SMH
Figures calculated show that due to these rate hikes from Westpac, Property Investors taking a five-year mortgage who borrow $450,000 will pay an extra $158 a month in repayments over 30 years.
A fixed rate mortgage means the rate will remain constant for a set period of time (usually 3 – 5 years). With banks increasing the rates on their fixed term mortgages, this provides an indication that they believe the variable rates are set to rise soon. The rates are locked in for the fixed rate term, therefore the rising of fixed rates indicates that the bank needs to cover themselves when variable rates rise. If the fixed rates were to low whilst variable rates sky rocketed, the bank would be locked in to provide the fixed rate loan at the lower rate. Could now be the best time to get in quick with a fixed rate home loan before rates go through the roof?
If you want to take advantage of the current interest rates, make an enquiry with one of our Loan Writers here. Or alternatively, if you feel as if your current rate is too high, Pioneer Credit Connect has a team of refinancing specialists ready to help you switch your home loan for a better deal.