While variable interest rates are continuing to rise, with another 0.50% increase earlier this week, some lenders are actually cutting their fixed rates.
Lenders started increasing their variable rates in May, once the Reserve Bank of Australia (RBA) began increasing its cash rate. However, lenders increased their fixed rates much earlier, in anticipation of future rate hikes and increases in their longer term cost of funds.
RBA data shows that interest rates for fixed loans:
- with terms greater than three years have been trending up since December 2020
- with terms of three years or less have been trending up since November 2021
Recently, some lenders have concluded that the RBA will not increase the cash rate as much as they originally expected. Another factor is that global money markets, where Australian banks source their funds, have eased. As a result, some of their fixed rates had moved too high, which is why these banks are now reversing course and making some reductions.
With variable interest rates almost certain to rise further in the short term, before stabalising and potentially decreasing again, please have a read through one of our previous posts where experts share their best tips on how to cope with rising interest rates.
Unsure whether to go with a fixed loan, a variable loan or a split loan (which is part fixed and part variable)? Contact us so that we can talk you through the pros and cons of each option. There is a lot of noise around rates at the moment. Let us help to cut through the noise.