There has been quite a deal of discussion in the news of late centred around when, not if, home loan interest rates will enter the rising stage of the next cycle. To use a descriptive phrase, ’the waters have been muddied’ somewhat . This has occurred because of the changes in the way the federal Government regulator (APRA) risk weighted mortgage loans, placing a higher risk on investment home lending and then a further heightened risk on ‘interest only’ loans. Following this increased segmentation all lenders made upward adjustments to their variable and fixed home loan rates. That occurred over the last 6-12 months but has principally settled now.
To use another metaphor, after ‘the dust settled’ on these interest rate adjustments we have been able to return to focus on what is actually influencing interest rate movement in terms of macro-economics. The easiest way to demonstrate this at present is by looking at the following fixed rate owner occupied home loans currently being offered by a lender:-
1 year 3.50%
2 years 3.50%
3 years 3.50%
4 years 3.50%
5 years 3.50%
Now this particular lender might be aggressively chasing new home lending, but by offering the above it’s also sending a clear signal that in their estimation they are not expecting rate rises any time soon. The forecast yield curve is as flat as you can have it . In other words right now there is no curve! Of course that can change with some up beat positive economic data being released relating to inflation , GDP, or jobs & wages growth etc but for now home lending rates appear to be quite steady. Variable rates are also quite stable & the competitive market place is helping to keep downward pressure on rates.
With all these changes having occurred it’s definitely worthwhile reviewing your home lending position because you may find that your current lender has made adjustments to the variable loan interest rate that has left you paying a higher rate than you need to?
Contact Michael on 65832211