RBA and Rates – Fix or Not

Home loan rate increases and what it means for you

Westpac recently announced that they will be increasing the variable home loan rate by 20 basis points from November this year. The announcement was a shock to many Australian home owners, although it did not come as a surprise to economists.

The Australian Prudential Regulation Authority (APRA) have announced that they will be requiring the four major banks to increase the capital held against home loans. The easiest and quickest way to ensure that they are complying with this regulation is to increase the variable home loan. Which is why each of the ‘Big Four’ has quickly followed Westpac’s move to increase rates.Moneyhouse

We must remember that even though the banks have increased the mortgage interest rates, we are still at a near all-time low for interest rates over a historical 50-60 year period.

The RBA will meet on the 3rd of November. House prices and mortgage rates will certainly be on the agenda, with the issue of Sydney’s unstoppable house price increasing the demand in the market. If prices were not as high in Sydney, the RBA would have a less difficult decision about cutting interest rates on their hands.

Sydney’s house prices have featured highly in the news as being difficult for first home owners to enter the local market, but the impact of prices means that there is an imbalance between the right interest rate for Sydney versus the rest of Australia.

We’ve heard the term ‘two-speed economy’ when discussing the mining industry, and Sydney’s home prices are presenting a similar issue, with other states including South Australia and Tasmania having languishing real estate markets.

With current interest rates being at a low of 2.00%, it might be worth considering fixing your home loan. Of course, there are a lot of considerations when converting from variable to fixed rate, including any potential changes on your domestic horizon. Breaking your fixed rate contract, such as what might happen if you need to move, change your loan product, or go into default, means that you will be up for fines.

It can be difficult to keep up with the latest economic news. If you want to discuss entering the home loan market, or making sure that you are in the best financial position that you can be in with your current home loan, speak to All Nation Finance. We have 30 years’ experience and are well-informed Finance Brokers in Perth.

Call Alan on 0424 185 442 or email: alan@allnation.com.au