The Reserve Bank meets on the first Tuesday of each month (for 11 months of the year – they give themselves a holiday in January) and makes their announcement regarding interest rates that day. Over the past couple of years we have seen these announcements as either no change, or a reduction in rates. The following 2 weeks are then full of news of which bank is passing on the full Reserve Bank change and which isn’t and then when the rate change will take affect from. We have all now got used to banks not passing on the full rate drop and then taking their time to make the change.
That’s all about to change. Based on what I read and hear, personally I think the rates are now at their lowest so we will start to see interest rate rises. Some fixed rates increased last week and I’m sure there will be more to follow.
If the Reserve Bank announces an increase to interest rates, expect to see the big banks racing to pass on the rate change and it will all be implemented faster than any of the rate reductions we were getting. Don’t expect to see rate increases matching the Reserve Bank increases, I think we will see them bigger than that. We will probably also see interest rate increases out of cycle with the Reserve Bank - you won’t have to wait for the first Tuesday of each month, banks will be making changes at other times too.
Now is the time to seriously consider fixed rate home loans. Yes, you normally lose a bit of flexibility on your loan (like redraw and offset account) but there are smaller lenders who still have these features. Or maybe you split your loan and go part fixed, part variable – you get the best of both worlds with surety on the fixed rate and flexibility on the variable portion.
Yes, it’s time to contact us at Mortgage Choice in Blackburn to discuss what is right for you.