Have home loans reached the bottom of the cycle

Friday 22 March 2013

Article by Mozo

A hike in two year fixed interest rates by one of the Big Four banks is being taken as an indicator that home loan rates may have reached the bottom of the cycle, report the News Limited Network.

Home loan interest rates doing an about turn.

A little more than a month after Westpac lead the way in dropping their 2 year fixed interest rates below 5 percent, they are again leading the way, with an about turn hike of 0.3 percent bringing their 2 year fixed rate back over 5 percent, to 5.29 percent. And it is expected that the other major banks will again follow Westpac's lead.

"While there remains a downward outlook on variable rates, fixed interest rates are now likely to rise and soon intersect with standard variable rates," said Loan Market mortgage broker, Paul Smith.

Many economists now believe that another official rate cut by the RBA is unlikely. Fixed rates have seemingly reached their lowest point and likely to rise on the back of the improving Australian economy.

However, the move by Westpac comes shortly after the RBA suggested that the major banks have capacity for  out-of-cycle interest rate cuts.

Following the minutes of their March meeting, the RBA stated that the housing sector was picking up, retail conditions have improved and unemployment was subdued.

"But funding conditions for banks remained favourable as they have been for some months," said the RBA.

While all eyes are on the major lenders and their interest rates, a home loan comparison will show that many lenders are still offering home loan interest rates well above the headline grabbing banks.

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