Home loan forecast for 2017 - rates tipped to continue their upward climb

For homeowners considering the option of locking in their interest rate on a fixed rate loan, now could be the time to do so, as Mozo's banking data expert is predicting more out of cycle rate increases in the new year.

Over the last month, Mozo’s database has been inundated with fixed rate home loan hikes, despite the official cash rate plateauing at a historically low 1.5% since August.

With the RBA tipped to hold rates again this afternoon, Product Data Manager Peter Marshall warned that based on what he’s seen so far, the gap will only yawn further.

"We're seeing lenders increase interest rates on fixed home loans pretty much every day at the moment,” he said.

“I fully expect that over the next few weeks, we'll see the trend continue."

Marshall added that the comments made by ANZ CEO, Shayne Elliott, at a Reuters event in Sydney last week, was a case in point, of what banks will do with interest rates next year.

"ANZ's recent indication that out of cycle rates are on the horizon, is preparing customers for what's to come, so when rates flare up, they won't cause such a shock.”

According to Elliott, the RBA cash rate is not the only thing ANZ considers when it comes to setting interest rates, but depositors and international credit markets too.

While Mozo data shows there haven't been many rate increases applied to variable rate home loans, Marshall is predicting that providers will start raising them across the board by mid 2017.

As for smaller lenders who are yet to cash in on the rate hike trend, he said it’s really only a matter of time before they’ll follow suit.

"Eventually, most of the smaller lenders will have no choice but to pass on the rate increases of the major banks, as many are funded by them,” said Marshall.

He advised borrowers to consider fixing at least 50% of their home loan rate for three years to protect their budget from future out of cycle rate rises.

Best fixed rate home loan offers

  • 1 year - 3.59% - Greater Bank (comparison rate: 4.42%), QT Mutual Bank (comparison rate: 4.38%)
  • 2 year - 3.59% - QT Mutual Bank (comparison rate: 4.34%)
  • 3 year - 3.49% - My Credit Union (comparison rate: 4.16%)
  • 4 year - 3.75% - BCU* (comparison rate: 4.24%)
  • 5 year - 3.85% - QT Mutual Bank (comparison rate: 4.35%)

*Product no longer exists (as of 17/12/2018)