Our interest rates outlook over the next 12 months is for the official RBA cash rate to remain steady at 2.0%. Many market commentators expect the RBA will reduce the official cash rate by 0.25%, and it could be as soon as May 2016. If the RBA does reduce rates by 0.25% we expect that the banks may not pass on this full reduction to improve their profit margins, which are relatively tight at the moment.

Fixed rates for most lenders are generally attractive relative to variable rates at the moment. Whatever happens in the short term our expectation is that we are close to the bottom in this interest rate cycle. It is possible that rates could go down further. If we look at other parts of the world, Europe and Japan currently have official central bank interest rates which have recently moved below zero, to be negative.

Interest rate announcement – March 2016

Today the Reserve Bank of Australia met to review the official cash rate. They have decided to leave the rate steady at 2.00% again this month. We expect that most lenders will leave their interest rates unchanged, in line with the Reserve Bank’s decision.

Competitive rates up to 3 years are similar to those for 4-5 years:

  • Competitive variable rates are currently in the range 4.0% to 4.5% pa
  • Competitive fixed rates for 1-3 years are in the range 3.9% to 4.4% pa
  • Competitive fixed rates for 4-5 years are in the range 4.3% to 4.8% pa

The fact that competitive fixed rates are similar to competitive variable rates indicates that over the medium term (i.e. 3 years) the market expects interest rates to remain close to current levels. We share this view and expect that, due to the Australian economy growing at a moderate level, interest rates will remain close to current levels.

This is generally good news for mortgage holders, and not such good news for retirees looking for income from their cash investments. This also raises an important question of whether it is a good time to fix your home or investment loan interest rate.

An option is to fix a portion of your loan and keep the rest on a variable rate. As interest rates are at historic lows and are expected be stay reasonably flat, we suggest fixing up to half the loan for between one to three years could be attractive. However, you can scale this depending on your financial situation by fixing a higher portion if your budget is tight, or a lower portion if you feel financially comfortable to do so. As the interest rate outlook is currently flat to slightly lower, fixing for a longer period may not always work in your favour.

We can assist you with your home loan

Shopping around, comparing and negotiating may save you thousands of dollars. We can assist with this research and decision making process free of charge.

At Harvest, we provide independent advice about home loans based on your personal financial situation, and therefore, do not favour any particular lender. We have access to 27 loan providers to make sure you get the best value home loan by customising a package for you that best meets your needs.

Our Current Best Interest Rates

The best home loan rates we currently have available:

  • Variable rate of 4.08% pa
  • 1 year fixed rate of 4.14% pa
  • 2 year fixed rate of 3.94% pa
  • 3 year fixed rate of 4.04% pa

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