Happy New Year for 2018 and thank you in continuing to read our regular articles on interest rates.
I was recently reviewing interest rates to see where we were in January 2017, where the owner occupied standard variable rate was at 5.10%* before discounts, and the 3 year fixed rate was around 4.24%*. For investment loans the variable rate was 5.56%*, and 4.44%* for a 3 year fixed rate.
Lets now fast forward to January 2018, Owner Occupied rates are at variable 5.22%*, and 3.99%* for the 3 year fixed rate, whilst for investment loans it is 5.80%* and 4.39%* respectively.
Commercial interest rates are showing similar trends. The Reserve Bank Base or Cash Rate that most lenders use in calculating commercial loan rates, has remained at 1.5% since 3 August 2016.
So what will they be in January 2019?
It is an interesting question, however in the short term – say the next 3 months, rates should be pretty much the same and the Reserve Bank has indicated rates will continue at similar lower levels over the next 10-12 months. If Australia wishes to remain competitive globally, and this means our exchange rates need to continue at current bandwidths, then rates should remain low. Inflation, consumer sentiment, petrol prices, and wage growth will be factors to determine future rate rises, and with wage growth in particular at the lower end, I would think they would be reluctant to raise rates.
Don’t believe what you read in the paper!
In reading some of the news over 12 months ago, you would think property prices were going to collapse and interest rates were going to rise significantly. On March 16, 2017, News Ltd reported that JP Morgans Australian Mortgage Report, indicated investors would face up to 3% in interest rate hikes. No timeframe was mentioned, but it would scare a few investors. In fact apart from investor interest only lending which has increased due more in part to regulatory pressure, you can see that rates have actually moved downward, other then the standard variable rate.
So what should you do?
Read your own circumstances first. Questions such as “How long are you going to hold the asset, do you have a repayment strategy, are you a risk taker or conservative by nature, need to be answered before determining your variable, fixed rate, or a mix of both, interest rate strategies.
If you are wanting to discuss interest rate strategies for your existing loans, give us a call, we would be more then happy to assist.
* Reference Commonwealth Bank, non-comparison rates based on Principal and Interest.