Debbie Shankar - 30 Jan, 2017

Demand for Fixed Rates Jumps

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It is the beginning of an exciting year for the Australian economy. Economists suggest America’s rates will start to increase, and if this occurs, Australia will have no choice but to follow. Plus, banks are beginning to raise rates independent of any Reserve Bank of Australia (RBA) decision. Home loan holders across Australia are seeing this as a sign that rates will now only go up. So, they are beginning to take advantage of still low fixed rates enabling them to save.

Is the Interest Rate Party Over?

Australian banks are said to be drawing a distinctive line in the sand. Interest rates on home loans have started to rise, and this is only a taste of what is to come. Financial experts feel some substantial rate increases may be on the cards. Such a prediction comes after 14 lenders moved independently when the RBA left the cash rate on hold last month.

In early December, The National Australia Bank announced that it would raise investor loans by 0.15%. Westpac also announced it would increase interest only loans. Lenders are also said to raising fixed rate loans.

Monetary comparison firm, Canstar confirms that 14 financial institutions raised their interest rates independently. The majority of the rises are on fixed rate home loans. Increases are as high as 0.18% in some cases. At present, the average fixed rate home loan is 4.08% for 3-years. Over a 30-year, $300,000 home loan this change equates to a $1,446 monthly repayment. As a comparison, the average variable rate mortgage is at 4.45% making monthly repayments $1511 per month.

Some lenders introducing rate hikes apart from the NAB, Westpac are ING Direct, Suncorp, and ME, as well as RAMS. But, economists believe other financial institutions will follow suit shortly, and this is just the beginning of rises.

Lending Guidelines Tighten as More Loan Holders Fix Rates

Lenders are becoming nervous, so they are looking to encourage preferred borrowers, and reduce the number of unsuited home loan applications. Furthermore, loan applicants who are employed on a retainer and rely on commissions may find it harder to get approval.

However, lender clamp-down is not deterring investors from applying for a fixed-rate home loan. Mortgage brokers say that the numbers of refinance loans they have seen just recently have jumped considerably. According to data, one in four home loans are electing to fix; this rate is the highest in 2-years.

A number of the best fixed rates currently on the market are just below 4%. Nonetheless, this depends on a borrower’s individual circumstances. Consequently, the lowest standard variable rate, on the other hand, is 3.85% and the highest 6.11%. Therefore, the market varies widely. These significant differences in rates should act as a motivator for borrowers to shop around before selecting a loan.

The Special Offers Currently Available

Most lenders have a number of deals to attract preferred borrowers. Deals typically vary considerably from lender to lender. Although, if you shop around, then you should be able to find the right deal for you and your circumstances. Selected offers include a cashback for a loan over a set amount. For instance, the Commonwealth has a $1500 cashback deal on home loans of $250,000 or more, which covers establishment costs.

Honeymoon rates are also enticing; these loans offer you a super low rate for 12-months. After this time, the loan then reverts to a higher rate. Nevertheless, before signing, make sure you know what your new rate will be after the honeymoon is over.

Other lenders may offer you rewards such as frequent flyer points to use their services. For instance, the NAB is currently offering 250 thousand velocity to new borrowers.

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