What Is Happening With Interest Rates in Australia?

As Australians come to terms with the latest interest rate announcement from the RBA, we take a look at the rates currently on offer from our panel of lenders and discuss lender interest rate movement over the past few months.

Interest Rates and The Cash Rate Set by the RBA (Reserve Bank of Australia)

Rates once again significantly increased across all loan types this week, even prior today’s 0.50% rate rise announcement from the Reserve Bank of Australia (RBA).

In November 2020, at the height of the Covid pandemic and resulting economic conditions, the cash rate set by the RBA plummeted to a record low of 0.10%, where it stayed until May 2022.

As lenders are influenced by the RBA cash rate (among other factors) when setting their home loan interest rates, Australian homeowners experienced unprecedented low-interest rates during this time.

As lockdowns lifted and economic factors began to change, it was always likely that rates would need to start increasing again. As a result, in May 2022 the RBA announced a rate increase of 0.25% (a quarter of a percent). An additional 0.50% (half a per cent) rate rise was announced by the RBA in June, and a further increase of another 0.50% (half a percent) was today announced after the RBA’s July meeting.

This means that since May, the RBA has already raised the cash rate by 1.25% and we can expect a series of further rises to help combat the increasing inflation rate in Australia.

According to 9 News, For the average owner-occupier with a $500,000 debt and 30 years remaining on their loan, monthly mortgage repayments rise by $144 as a result of today’s decision.

This is on top of the rate increases already passed on in previous months.

How Will I Be Affected By Further Rising Interest Rates in Australia?

Any interest rate rise is likely to impact you if you have a variable rate loan.

When rates increase, your home loan repayments will also need to increase.

Your lender or broker will be able to tell you your new repayment amount, and when this change takes effect, so you will need to ensure you have sufficient funds budgeted to cover the increase.

If you have a fixed-rate loan, your interest rate will not change during your fixed period.

However, it’s essential to be aware that in a rising rate market, your interest rate and repayment amount may increase sharply once your fixed-rate period ends. 

Therefore, discussing this with your broker is critical to preparing for this transition.

Can I Fix My Home Loan?

Fixed rates have increased dramatically over the last six (6) months.

At the height of the pandemic and resulting economic uncertainty, some lenders offered 4-year fixed loans at under 2%.

Today our lowest fixed rates start in the high 3% to mid 4% range for one (1) year, and the rate increases significantly the longer you plan to fix your rate.

While fixing your rate does remain an option, it’s essential to speak with your broker to understand the risk and benefits and decide if this is an appropriate course of action for your circumstances.

NBS Home Loans has written a helpful article for Australians on UNDERSTANDING INTEREST RATES, expanding further on our information here: https://www.nbshomeloans.com.au/understanding-interest-rates-in-australia-in-2022/

Find Our What’s Right For You and Your Home Loan

It’s vital to review your loan to ensure it’s still a good fit, so chat to your broker sooner rather than later to see if there are better deals where you may be missing out.

With hundreds of loans from over 40 lenders and over 20 years of experience, NBS Home Loans take the hard work out of comparing loans to make sure you aren’t leaving any money on the table by missing out on other options.

Contact us today on 0434 103 326 to discuss your options for your personal situation.

For an up-to-date overview of the current rates on offer, visit our Facebook page at facebook.com/NBSHomeLoans