If the RBA is keeping rates steady, why are fixed interest rates increasing?

The interest rate on some fixed-rate home loans is on the rise, despite no upward movements from the Reserve Bank (RBA).

Today, the RBA decided it would continue to hold the official cash rate at 0.10%. It is the sixth consecutive month the figure has remained unchanged.

But despite no moves from the RBA, April saw several lenders spike the interest rate on four-year fixed-term home loan offerings.

Are low-interest rates over?

According to RateCity research director Sally Tindall, recent fixed rate hikes could be a sign of things to come.

“With the RBA’s term funding facility now in its final stretch and the next cash rate hike firming up for early 2024, if not before, the writing is on the wall for ultra-low four and five-year fixed-rate loans,” she said.

“Money might be cheap now but in a few years’ time it’s likely to be a very different story, provided the economic recovery stays on track.”

Are you yet to lock in a low rate? Get in while interest rates are still low. Talk to us about organising your home loan approval or refinancing.

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What could rate hikes mean for borrowers?

For borrowers who have recently refinanced or taken out a new fixed-rate home loan, recent hikes could indicate that the interest rates available on home loan products may look very different by the time their current term ends.

According to ANZ senior economist Felicity Emmett, home loan holders with fixed rates ending around May 2023 could face considerably higher interest rates.

“It will represent a tightening for people’s cash flows,” she said.

“But keep in mind, in terms of people’s ability to afford these loans, that the banks still have lots of criteria around mortgage serviceability and there is the buffer there.”

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How can I keep my interest rate low?

While borrowers don’t have any control of market movements, they can leverage what’s available to work for them. Here are some ways you might be able to keep your interest rate low.

  1. Maximise your savings organise your refinancing or pre-approval while rates are low to strengthen any potential home loan savings.
  2. Stay organised Diarise your fixed-term end date and be on the lookout for low rates as it approaches.
  3. Shop around Loyalty doesn’t pay. Compare multiple home loan products for the best chance of securing a low rate.

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