Bank of England raises interest rates - will the RBA follow suit in November?

Kelly Emmerton

03 Nov 2017

Bank of england rba cash rate content

The Bank of England recently raised interest rates in the UK for the first time in ten years, and Mozo Data Manager Peter Marshall has said Australia could be next in line for an increase.

According to Marshall, one of the things the RBA looks at when deciding monetary policy is the interest rates of comparable countries, like the UK or US, because it affects the flow of money into Australia.

Recent moves from both the Fed, which hiked rates earlier in the year and now from the Bank of England, which raised from 0.25% to 0.5%, mean the Reserve Bank of Australia may begin to look at a rate rise down under as well.

“Although rates in the US and UK don’t have a direct impact on Australia’s cash rate, when both The Fed and the Bank of England are increasing, lower investment flows into Australia help to keep the exchange rate lower and give the RBA scope to lift rates without damaging Australian exports,” Marshall said.

Refinance home loans to save you a bundle

Rates updated daily. Advertiser disclosure.

  • loans.com.au
    Mozo Expert Choice Badge" style="width:60px;">

    1.99% p.a.variable for 12 months and then 2.48% p.a.

    2.47% p.a.

    $1234

    Product details Close details
    Smart Booster Home Loan

    1 Year Discounted Variable Rate, Owner Occupier, Principal & Interest, <80% LVR

    1.99% p.a.variable for 12 months and then 2.48% p.a.

    2.47% p.a.

    A super low introductory rate home loan with no monthly or ongoing fees. Unlimited free redraws and unlimited additional repayments to help you build your equity and own your home sooner. Multiple loan splits available. (Rates revert after introductory period ends). 20% minimum deposit required. Winner of two Mozo Expert's Choice Awards for 2021.

    Smart Booster Home Loan

    A super low introductory rate home loan with no monthly or ongoing fees. Unlimited free redraws and unlimited additional repayments to help you build your equity and own your home sooner. Multiple loan splits available. (Rates revert after introductory period ends). 20% minimum deposit required. Winner of two Mozo Expert's Choice Awards for 2021.

    • $0.00

    • $0.00

    • yes - free

    • yes - free

    • Optional - with 0.10% additional interest

    • $520

    • 1.99% p.a.variable for 12 months and then 2.48% p.a.

    • 2.47% p.a.

    • $520

    • 80.00%

    • $50,000

    • $1,000,000

    • Variable

    • Principal & Interest

    • Owner Occupier

    • Weekly, Fortnightly, Monthly

    Read our Mozo Review to learn more about the Smart Booster Home Loan

    Details Close

  • UBank

    p.a.

    2.24% p.a.

    $1234

    Product details Close details
    UHomeLoan

    Owner Occupier, Principal & Interest

    p.a.

    2.24% p.a.

    $0 fees and easy application. Choose between weekly, fortnightly or monthly repayments. 3 year fixed rates are for new Owner Occupier Principal & Interest loans.

    UHomeLoan

    $0 fees and easy application. Choose between weekly, fortnightly or monthly repayments. 3 year fixed rates are for new Owner Occupier Principal & Interest loans.

    • $0.00

    • $0.00

    • yes - free up to $20,000 p.a.

    • no

    • no

    • $0

    • p.a.

    • 2.24% p.a.

    • $0

    • 80.00%

    • $100,000

    • $2,000,000

    • Fixed

    • Principal & Interest

    • Owner Occupier

    • Weekly, Fortnightly, Monthly

    • $395 Establishment fee waived for fixed rate loans that settle by 30 September 2022. Receive 1.75% 3 year fixed rate when you apply by 29 April 2021 and settle within 90 days.

    Read our Mozo Review to learn more about the UHomeLoan

    Details Close

  • Macquarie

    p.a.

    2.43% p.a.

    $1234

    Product details Close details
    Basic Home Loan

    Fixed, Owner Occupier, Principal & Interest, LVR<70%

    p.a.

    2.43% p.a.

    Get a flexible loan structure with up to six loan accounts with different rate types. Make free extra repayments. Enjoy free redraw facility. No upfront or ongoing fees. Option to earn Qantas points.

    Basic Home Loan

    Get a flexible loan structure with up to six loan accounts with different rate types. Make free extra repayments. Enjoy free redraw facility. No upfront or ongoing fees. Option to earn Qantas points.

    • $0.00

    • $400.00

    • yes - free

    • yes - free

    • no

    • $0

    • p.a.

    • 2.43% p.a.

    • $0

    • 70.00%

    • $150,000

    • $750,000

    • Fixed

    • Principal & Interest

    • Owner Occupier

    • Monthly

    Read our Mozo Review to learn more about the Basic Home Loan

    Details Close

  • Athena
    Mozo Expert Choice Badge" style="width:60px;">

    1.99% p.a.

    1.99% p.a.

    $1234

    Product details Close details
    Celebrate Variable Home Loan

    <60% LVR, Owner Occupier, Principal & Interest

    1.99% p.a.

    1.99% p.a.

    Fast and efficient online application. Automatic discounts as loan is paid off. Free extra repayments and redraw facility. Zero fees to consider. Min 40% deposit required. Winner of three Mozo Expert's Choice Awards for 2021.

    Celebrate Variable Home Loan

    Fast and efficient online application. Automatic discounts as loan is paid off. Free extra repayments and redraw facility. Zero fees to consider. Min 40% deposit required. Winner of three Mozo Expert's Choice Awards for 2021.

    • $0.00

    • $0.00

    • yes - free

    • yes - free

    • no

    • $0

    • 1.99% p.a.

    • 1.99% p.a.

    • $0

    • 60.00%

    • $100,000

    • $2,000,000

    • Variable

    • Principal & Interest

    • Owner Occupier

    • Weekly, Fortnightly, Monthly

    Read our Mozo Review to learn more about the Celebrate Variable Home Loan

    Details Close

^See information about the Mozo Experts Choice Home loans Awards

But don’t set your sights on a Melbourne Cup Day rate hike just yet. There are domestic factors that have a more direct impact on our monetary policy, which the Reserve Bank will need to keep a close eye on, including jobs figures, inflation, wages and housing affordability.

Marshall says that although many of these indicators are beginning to look up - jobs figures have been going well and wages are expected to pick up, though inflation remains below the desired level - the RBA isn’t likely to rush into any decision.

“In six months, if economic indicators are looking good and there are no major shakeups, the Reserve Bank will likely start feeling comfortable about moving rates up. But as usual, I’d expect a slow and cautious process,” Marshall said.

“By mid-next year, there’s a good chance we’ll have seen a rate rise.”

And if that happens, Aussie borrowers who bought into a red hot property market may have to plan for higher repayments on their home loans, because although banks don’t need to raise rates in line with the RBA, there’s every chance most lenders will.

Here’s a breakdown of how a 0.25% increase in interest rates might affect different borrowers’ home loan repayments:

$350k home loan over 25 years with a 90% LVR - The average interest rate for this borrower at the moment is 4.51%. If this rate rose by 0.25%, their monthly loan repayments would increase by $50.

$500k home loan over 25 years with an 80% LVR - If the average rate for this borrower increased by 0.25% to 4.62%, their monthly repayments would shoot up by an extra $71.

$700k home loan over 30 years with a 90% LVR - An increase from the current average interest rate of 4.49% to 4.74% would mean an extra $104 in interest each month for this borrower.

$900k home loan over 30 years, with an 80% LVR - If this borrower's rate went up 0.25%, from the current average of 4.37% to 4.62%, they’d wind up shelling out an extra $134 each and every month.

“The RBA are eventually going to move towards the neutral cash rate of 3.50%. So if you have a home loan, it’s a good idea to start thinking about your budget now, so you’re prepared for extra costs,” said Marshall.

Mozo’s top budgeting tips for home loan borrowers

If you’re looking at an extra $50 - $100 on your monthly repayments when the Reserve Bank eventually raise rates, here are some strategies to help ease the squeeze on your budget.

  • Eat in. Embracing home-cooked dinner parties at a friends place instead of a restaurant outing can save you a tonne of cash. In fact, Mozo’s recent Cost of Lifestyle Report found that restaurant dinners racked up a $11.7 billion bill for Aussies last year. Think of all those potential savings!
  • Have a garage sale. Or the modern day equivalent - putting your unwanted stuff up for sale on eBay. If you’ve got a garage full of old sports gear and a cupboard full of clothes you don’t wear, chances are you can make money from selling them second-hand, and free up some space as an added bonus!
  • Switch to a better value mortgage. Another way to counteract a home loan rate hike is to consider refinancing to a better deal. There are heaps of great rates on the market at the moment, so head over and compare home loans to see if you’re on the best possible deal for you.