 Interest rate debate
Homeowners are all asking the same question: should I fix my home loan? While interest rates remain at record lows, all factors indicate to rate rises in the near future, and everyone wants to know when and by how much.
New figures showing the economy grew 0.6 per cent in the last quarter are encouraging. This is the second quarter of positive growth this year. This indicates that the Reserve Bank of Australia (RBA) may start lifting rates by the end of the year. The RBA has left the cash rate at 3% for the last five months. According to Macquarie interest rate strategist Rory Robertson, the "October rate-hike bandwagon" is "rolling fast" and the RBA is likely to raise the cash rate sooner than the market expected.
The financial markets all predict an increase of 2% in the official cash rate over the next 18 months. RP Data suggest official rates could rise to 5.23% by February 2011.
Current home loan rates sit at just below 6 per cent, so mortgage rates could go back to the high 8 and 9 per cent seen in late 2008.
Banks have already started raising fixed rates however there are still some good deals on the market. Variable rates may rise in the near future, along with further increases to fixed rates. All eyes are on ANZ and National Australia bank to see if they will follow the CBA and Westpac and lift fixed rate mortgage rates.
New South Wales and ACT could be the most affected states with average home loans already the highest in the country.
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