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After over 18 months of record-low home loan interest rates, home owners can expect to see rates rise in the coming months and years. This could result in higher mortgage repayments and possible shifts within the housing market. 

We’ve been seeing major banks like NAB, Westpac and Macquarie hiking their fixed rates. For example, Westpac previously held the title of Australia’s lowest four-year fixed rate at 1.89%, and now it has been raised to 2.29%. Similarly, NAB has increased their four-year fixed rate by 0.05%, increasing it from 2.19% to 2.24%. 

This is happening because of the Term Funding Facility (TFF) coming to an end. The TFF commenced in March 2020 as a component of the Reserve Bank of Australia’s (RBA) COVID-19 response. 

It gives banks and lenders a high amount of funding at a super low interest rate (0.25%) that can be repaid over a three year fixed period. This encourages banks to lend to households and businesses. As of 30 June 2021, the TFF is closed to new funding drawdowns. 

The TFF helped lenders reduce home loan interest rates to lower than they’d ever been before. It primarily funded fixed rate mortgages, which are seeing interest rate increases in the TFF’s aftermath. 

Although the RBA claims to not put up the cash rate until 2024, economic data shows healthy and better than expected stats. Plus, banks can still put up interest rates regardless of cash rate changes due to rising costs of business, increased demand, budget changes, and other reasons. 

With home loan interest rates at risk of increasing at any moment, it’s time to [review your mortgage](https://www.lendi.com.au/home-loans/refinance/). If you’re not on a fixed rate, now could be the time to lock in a low interest rate for the next few years to avoid rate fluctuations.

## What do rising interest rates mean for homeowners?

The bigger your home loan amount, the more your repayments will increase. If you have the means to pay down your mortgage through extra repayments, you could save a lot on interest. 

The impact of an interest rate increase will affect people differently. Someone with a larger loan will feel the effects most significantly. If you still have 20-30 years remaining on your loan term, and haven’t refinanced in the last 12-18 months, now’s the time to review your options and compare rates. You may end up finding a great deal to last you the next few years. 

It’s important for newer homeowners to understand that the super low interest rates that we’ve seen over the last couple of years aren’t standard. You could think of interest rates as returning to normal, rather than just rising. 

For borrowers who have been struggling to meet their loan obligations, this can create stress. It may be smart to review your financial situation and see where you can make changes to help accommodate your increasing repayment amounts. A financial advisor or a mortgage broker can provide you with expert advice if necessary. 

## Is now the time to fix your interest rate?

Fixed interest rates are at their lowest point in history, and lower than variable rates. There are fixed rates currently on the market for under 2%. It is certainly worth considering, but whether it is the right option for you will depend on your home loan preferences and needs. 

A [fixed interest rate](https://www.lendi.com.au/home-loans/fixed-rate/) can provide an anxious borrower with a heightened sense of security knowing that their repayments won’t increase while on their fixed term. With a number of lenders still offering competitive fixed rate home loan packages, you could possibly lock in a good deal for the next 1-5 years of your loan term. 

But fixed rate home loans aren’t going to be for everyone, and they come with a number of limitations. For example, you typically can’t make unlimited extra repayments towards your home loan, and often won’t have access to home loan features such as [offset accounts](https://www.lendi.com.au/guides/offset-account/) and [redraw facilities](https://www.lendi.com.au/guides/home-loan-redraw-facility/) like you would with a variable interest rate. 

Plus, if you ever want to [refinance](https://www.lendi.com.au/home-loans/refinance/) your home loan during your fixed period, you’ll likely be charged [break costs](https://www.lendi.com.au/inspire/finance/loan-break-costs-explained-how-to-avoid/) for doing so. Our Home Loan Specialists can speak to you about whether a fixed rate home loan is the right move for you. [Get in touch](https://www.lendi.com.au/book-appointment/) with us today! 

- __Related:__ [How to prepare for an interest rate increase](https://www.lendi.com.au/inspire/finance/how-to-prepare-for-an-interest-rate-increase/)

## What could your home loan repayments look like?

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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.*