Raine & Horne Pearl Beach / Patonga
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What should I do now that interest rates are on hold?

July 7, 2023

Undoubtedly, property owners with mortgages would have experienced a sense of relief when the Reserve Bank made the decision to maintain the current interest rates.

Nonetheless, individuals with variable rate mortgages now face the dilemma of what course of action to take. According to most recent communication from the central bank, although inflation is on a downward trend, it is still considered relatively high. Consequently, there is a strong likelihood of further interest rate increases, potentially even one or two more hikes between now and Christmas. This would put variable rates at well over 6% before potentially coming back down in the new year.

The decision of whether to opt for a fixed or variable rate mortgage is made more challenging due to the compression of economic cycles. This is partly because consumer sentiment seems now more resilient and recovers at a faster pace compared to a decade ago. As a result, market cycles tend to be shorter, spanning 3 to 6 months instead of three to six years. So, looking forward, rather than experiencing distinct peaks and troughs, we expect more ripple-like trends that last for months rather than years. Unfortunately, the short-term focus of markets and interest rate cycles often works against the advantages of fixed-rate mortgages.

However, it is worth noting that you can still obtain fixed-rate loans ranging from 1 to 3 years starting at 5.64%. That said we have seen an upward trend with some lenders now charging 6.2%. The issue is that many experts are already suggesting that although there is still potential for rate increases, the cash rate may begin to decrease within a year, depending on global circumstances.

Therefore, if further rate increases will put pressure on the family budget and you can secure a fixed rate around 5.7% for 1 or 2 years, it might be worth considering this as an option. Otherwise, it would be beneficial to seek the assistance of a finance specialist such as Our Broker to find the best available variable rate loan.

To discuss your financial position and find the most suitable mortgage for your needs, please contact Our Broker today at 1800 913 677.