All of the ‘big four’ banks have raised their fixed interest rates for home loans.
There have been predictions that the cash rate, which is at a historic low, could start rising from November, however RBA Governer Phillip Lowe said while this was plausible, it was not certain when he addressed the National Press Club on 2 February.
On 1 February, the Reserve Bank confirmed the official cash rate will remain at 0.10% for the foreseeable future, but this has not stopped the banks from protecting their profit margins ahead of any rise.
What does this mean for customers looking for a fixes rate?
To give an example; one of the big four banks has raised its owner occupier 5-year fixed loan rate by 0.40% (from 3.59% to 3.99%) effective from 8 February.
This means that any new customers wanting to secure that fixed rate mortgage on a $500,000 loan will pay an extra $114 per month.
A number of smaller lenders are also following suit. Unfortunately, even though the banks have increased the rates once, it won’t stop them from continuing to increase the rates as it becomes more likely that the cash rate will increase later in the year.
With this in mind, there is a small window of opportunity to research the current options available and apply for a fixed rate loan – 2, 3 4 or 5 year loan – now, with the likelihood that these will become more expensive over time. The advantage of a fixed rate is that the interest rate is locked in for that specific amount of time, so you will know exactly what your repayments will be each month.
If you would like to discuss your mortgage requirements, whether you are a first time buyer, refinancing, or looking for an investment loan, please get in touch on 08 9240 7629 or email: andrew@taxproaustralia.com.au
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