With 2022 well underway, homeowners and homebuyers alike may be wondering whether home loan interest rates are set to rise this year.
The onset of the COVID-19 pandemic caused interest rates to drop in 2020 and 2021. With the Australian economy back on the rise, you may see interest rates start to increase as a result.
While we can’t provide solid data on the future of interest rate fluctuations, we can provide some predictions. Find out how likely it is that interest rates will rise, how you can prepare for incoming changes and whether fixing your interest rate is a good idea.
While we don’t know for sure what will happen in the future, interest rates are predicted to rise this year. However, any changes are expected to be marginal.
Based on rising fixed interest rates over the past few months, this is expected to come as a result of Australia’s recovering economy. While interest rates offered by lenders have historically been affected by the Reserve Bank of Australia (RBA) and the official cash rate (OCR), lenders are free to increase or decrease interest rates as they choose.
It’s expected that borrowers will likely find interest rates rising above 2% in 2022, but changes will be steady and gradual.
If you’re worried about how this might affect your home loan repayments, speak to a Home Loan Specialist. We’ll be able to help with any concerns you might have and give you the confidence to take charge of your home loan.
The RBA is in charge of setting the official cash rate (OCR). This has a flow-on effect on the cost of funding for banks and therefore all financial products. These include savings accounts, personal loans and of course, home loans.
The RBA's main objective is to support the Australian economy. That means economic stability, growing wages, high employment rates and steady inflation. And while our economy is slowly on the mend, we likely won’t see an official cash rate hike from the RBA until the first half of 2023.
Interest rates fluctuate for a number of reasons. They are expected to rise this year due to:
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It may be a little nerve-racking for homeowners and investors knowing interest rates may steadily rise this year. But there are several things you can do to prepare and put yourself in a stronger financial position to pay off your home loan.
For example, consider if you could:
If you want to avoid being affected by rising interest rates, it might be worth looking into a fixed interest home loan.
Fixed interest home loans allow you to ‘freeze’ your interest rate for a certain amount of time (usually 1-5 years). Because of this, your interest rate won’t be affected by any rate fluctuations during your fixed term.
It’s important to note that fixed interest home loans don’t provide the same flexibility as variable rate home loans. For example, they usually don’t allow you to make extra repayments on your home loan without incurring a break fee. They also may not offer features like a redraw facility or offset account.
Also keep in mind that fixed rate home loans lock in an interest rate for a specified period, meaning you won’t benefit if interest rates decrease.
If you have any questions or concerns about predicted interest rate increases this year, speak to a Home Loan Specialist at a time that suits you.
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The information in this post is general in nature and should not be considered personal or financial advice. You should always seek professional advice or assistance before making any financial decisions.
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