Have borrowers missed the bottom of the rate cycle?

November 24, 2016

Mortgage Choice chief executive officer John Flavell believes Australia's lenders will soon start raising their interest rates.  

“There is growing speculation that the United States' Federal Reserve will lift the official cash rate at its next Board meeting on December 14,” he said.

“Furthermore, other Central Banks from across the globe are now signalling that the bias for easing monetary policy is over. Closer to home, the Reserve Bank of Australia strongly suggested at its November Board meeting, that the time for easing monetary policy has now passed.

“This idea is supported by the fact that long term bond rates have started to move slightly higher and we have already seen increases in some of the fixed rates on offer domestically.”

Mr Flavell said it was “very likely” that home loan rates have already hit the bottom of the interest rate cycle.

“If people have been waiting for the bottom of the rate cycle, it may well have already passed,” he said.

“The fact that we have seen some lenders starting to increase their fixed rate pricing would suggest we have hit the bottom of the rate cycle, and are now at the point where rates will soon rise.

“Of course, even if rates do rise in the near future, it is important that borrowers do not panic.

“The reality is, interest rates are incredibly low by long term standards. So, even if rates do rise over the coming months, they will continue to hover around all-time lows.”

Mr Flavell said anyone who is concerned about the future trajectory of their home loan interest rate could potentially look to fix all or part of their mortgage.

“There is a case to lock in to a fixed rate mortgage while home loan rates are still sitting below 4%.  By locking into a fixed rate mortgage, borrowers could beat any potential rate rises,” he said. 

“In addition to avoiding future rate rises, borrowers who choose to fix their mortgage will be given a sense of security around their ongoing mortgage repayments.”

Before making any home loan decisions however, Mr Flavell said it was important for borrowers to consult a mortgage professional.

“Your local broker can help you determine whether or not switching home loans is the right financial move. In addition, they can do all of the legwork and make sure that whatever choice you make, it is the right one for your needs.”