Mortgage rates are on the rise: is it time to fix?


Since the beginning of the year, we have seen more than 20 mortgage lenders discreetly increase their home loan rates.

While some lenders have increased only their investment loan interest rates, others have increased the rates across their entire suite of home loan products.

With wholesale funding costs increasing and new prudential rules forcing Australia's lenders to hold greater capital, it is likely that the recent spate of rate rises is merely the start of things to come.

mortgage rates rise fix

As such, we may see a greater number of lenders changing their product pricing out of cycle with the Reserve Bank of Australia (RBA).

Looking at the RBA, it would appear as though there is room for it to cut the official cash rate at least once more before the end of the calendar year. Indeed, if we review the three-, six- and nine-month forward rates, it seems the domestic market has already factored in another rate cut.

Furthermore, the US Federal Reserve - which lifted the cash rate in December 2015 for the first time in seven years - is now talking about "feathering the throttle".

According to a statement by the Federal Reserve, global economic and financial developments continue to pose risks. As such, future rate increases have been put firmly on the backburner.

All these factors would suggest there is room for the RBA to change its stance on monetary policy.

Such a level of uncertainty surrounding the future of interest rates is likely to encourage a greater number of borrowers to fix their mortgage rate.

Mortgage Choice data shows 23% of all loans written are at least part fixed - a percentage that is growing month on month. While a fixed rate can help borrowers avoid future rate hikes, borrowers shouldn't fix their mortgage simply to beat the threat of rising rates. Product choice should be driven by suitability, not pricing.

For those who are worried about rising interest rates, the key is to research the market, speak to a professional and see what other product options are available.


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