Fixed Interest Rates Starting to Rise

After nearly two years of downward movement on fixed interest rate home loans, a major bank has made the first increase on their fixed interest rates this year and it’s now likely that other lenders follow suit.

Loan Market corporate spokesperson Paul Smith said that after months of speculation it appears that fixed rate products have reached their lowest point and that they will rise as funding volatility and improvements in the Australian economy prompt higher fixed interest rates.

“While there remains a downward outlook on variable rates, fixed interest rates are now likely to rise and soon intersect with standard variable rates. For many home owners, the window to lock in a fixed rate that’s lower than a variable one is closing fast,” Mr Smith said.

Mr Smith said that this was the beginning of a shift in the home finance market as the banks and lenders react to the improvements in the domestic economy and the limited movements of the Reserve Bank of Australia (RBA).

“There’s certainly still scope for the RBA to lower the cash rate in the coming months, as some sectors are still lagging whilst others are showing steady improvement.”

“If lenders start to increase the rates of their fixed products, they’re likely not anticipating the same downward pressure from the market to drop their variable rate interest rates. We could be moving to the point in the interest rate cycle where variable rates are lower than fixed rates.”