Trump factor affects fixed interest rates

November 23, 2016
Jim Demetriou

There are signals that rates may be on he move with some lenders increasing their rates on their fixed rate home loans this month. This could be a sign that interest rates are on the upward move.

The Trump factor is shaking up the market as uncertainty takes grip after the republican was surprisingly voted in as president. With the uncertainty comes risk, and the global markets are pricing on risk. This means that funding costs across the globe are on the rise which means fixed rates are increasing. Higher funding costs are going to hit smaller lenders first as they are more susceptible to market uncertainty.

Research group Canstar notes, "since Donald Trump won the US election, there has been a sharp rise in 3-year swap rates, putting pressure on bank profit margins for fixed rate loans.

These rates have risen on the basis that Trump would spur US inflation significantly through his planned tax cuts and massive infrastructure spending.

The 3-year swap rate, a benchmark for fixed rate loans, rose by about 20 basis points in five days after Trump won.

This pushed some Australians lenders to hike their rates for fixed rate home loans".

AMP Chief Economist Shane Oliver told Fairfax it’s likely we have seen the bottom of the interest rate cycle or are very close to it.

“So there is a case to lock in fixed rate mortgages when their rates remain ultra-low below 4%,” he said.

The $64,000 question; is it time to fix your mortgage?

If you are considering fixing your mortgage, now may be a good time to feel for what is available. Call me on 9525 0112 for an obligation free quote on fixed rates available.  

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