HOME > BLOG > Home Loan Advice > 2014...The Year of no interest rate movements

According to industry experts, mortgage holders are expected to receive an early Christmas present with interest rates predicted to stay on hold in December.

Mortgage holders received an early Christmas present in December with interest rates staying on hold for another month. 

With the RBA deciding to keep the cash rate on hold once again, then this will be the year interest rates have made it through without one rate change. There are a number of factors within the economy that have kept the cash rate at 2.5% since August 2013.

The inflation rate has an impact on how the cash rate is determined. At the moment, Australia’s inflation rate is currently sitting at 2.3%, which is within the RBA’s target of 2 to 3%. The unemployment rate is also another contributing factor. But, according to the Australian Bureau of Statistics, unemployed is at 6.2% for October and has not changed since September.

Due to these statistics indicating stability, it may be many more months before mortgage holders will see a change in interest rates. According to the finder.com.au Reserve Bank Survey, 95% of the expert panel believe there will be a cash rate change in 2015, with 70% predicting this change will occur in the second half of the year. While 92% of the expert panel predict that the cash rate will increase in 2015, three of the experts believe the cash rate could be reduced again. Factors such as a falling house market and slowing growth in China and other countries could cause the cash rate to be cut again.

Even though interest rates may not change for another few months, mortgage holders shouldn’t assume the same stability for 2015. The RBA cash rate has not always been so stable in the past and there is always the possibility of an unexpected interest rate hike over just a couple of months. It is important to think long term and not just budget for the current low interest rates. 

If you are concerned that you will not be able to afford an interest rate increase, there are a number of options to consider. 

Fix your home loan: By changing to a fixedinterest rate, you will be able to guarantee stability in repayments for the fixed term you choose. But remember to do your research about what the interest rate will revert back to once the fixed period is over. Ensure that the rate will still be competitive or you will probably be looking to refinance to a more competitive variable rate, with the hassle and expense of changing lenders. If you are interested in fixing you home loanspeak to our friendly team on 137262 about the options available. Remember that there are pro’s and con’s of fixing so make sure you consider these carefully before you dive in.

Make larger repayments now: Give yourself some time to prepare for an interest rate rise. Start putting extra money towards your repayments each month. This way, you can start to adjust your budget to allow for larger repayments and you have the added bonus of paying more off your home loan. If you find that you cannot afford the repayments, you will have time to come up with a plan before the interest rates actually change.

Refinance to an even cheaper rate
You could be enjoying the benefits of a rate cut without the RBA doing anything. Even though the cash rate has remained on hold, the same can’t be said for interest rates being offered to borrowers. Compare what you are currently paying and look around at comparison sites like Ratecity to see what rates are being offered. State Custodians currently has a special on their variable rates. To make it cheaper to change lenders, the setup costs have also b
een dramatically reduced as part of this special offer. This is a limited time offer so check it out and if it ticks all the boxes apply online to secure this great deal.