Is now the time to look at fixed rates?

By the resi financial blog team, 03 December 2014

Is now the time to look at fixed rates?

The announcement on the first Tuesday of December by the Reserve Bank of Australia (RBA) to keep the cash rate at the all time low level of 2.5 per cent for another month is welcome news for investors and home buyers alike.

The latest monetary policy decision put the low interest hold at 17 consecutive months, according to the Housing Industry Association, which is the second longest period of interest rate stability in the last decade.

Given that the the RBA does not generally meet in January, it seems very likely that the overnight cash rate will continue its hold over the holiday season and into the beginning of the new year.

How does this affect my home loan?

If you are looking to get your first home loan or would like to refinance at a lower rate, now could be the ideal time do so. The low cash rate has created an environment of rock bottom interest rates on mortgages.

According to the official statement by the RBA on December 2:

"Monetary policy remains accommodative. Interest rates are very low and have continued to edge lower over the past year or so as competition to lend has increased."

As the future is never certain, the current low interest rate home loans present a very real opportunity for home buyers. Fixing for a 1, 3 or 5 year term now could mean locking in one of the most favourable interest rates you are likely to come across.

What are the predictions for the future?

In the last decade, the cash rate has not been held steady for more than 19 months, according to the HIA. However, many sources expect the low rate to continue well into 2015. While the low overnight cash rate is predicted to reach a record period of consistency, it is important to remember that the OCR does not dictate the interest rate that home loan lenders charge, although it is a very large influence.

The decisions by the RBA have a far-reaching effect on the economy as a whole, but for consumers it is imperative to take advantage of the best low interest fixed rates possible when they are advertised.

Going forward, the RBA indicates that continued stability in the cash rate level would be most beneficial to the economy, according to present conditions.

"Looking ahead, continued accommodative monetary policy should provide support to demand and help growth to strengthen over time. Inflation is expected to be consistent with the 2–3 per cent target over the next two years," said the statement by Glenn Stevens, governor of the RBA.

"In the Board's judgement, monetary policy is appropriately configured to foster sustainable growth in demand and inflation outcomes consistent with the target. On present indications, the most prudent course is likely to be a period of stability in interest rates."

When it comes time to lock in a favourable interest rate with a fixed rate home loan, talk to a resi loan specialist to get the full picture on what's available.

Categories: Home Loans, Property Investment