Home loan interest rates in focus as RBA hikes again

With the latest 0.25% rate rise to 4.35%, the Reserve Bank of Australia has taken the official cash rate to its highest point since late 2011.

PropTrack senior economist, Eleanor Creagh says the RBA made this move in order to keep inflation expectations anchored and maintain confidence in returning it to the target range within a reasonable timeframe.

That range is said to be between 2 and 3%.

Meanwhile, home prices continue to trend upward. 

“The PropTrack Home Price Index shows that the home price rebound is firmly established, with prices hitting record highs in many markets in October," said Creagh. "National home prices reclaimed 2022’s price falls in their entirety last month, with the upswing continuing in October. 

"Prices nationally climbed 0.36% month-on-month, bringing them up 4.93% so far this year after 10 consecutive months of growth."

PropTrack's research shows that several factors are keeping the property market buoyant, despite the pressure of the climbing cash rate and subsequently higher home loan rates for borrowers.

Among those factors are record levels of net overseas migration, a challenged rental market, limited housing stock and a slowdown in the completion of new builds, all offsetting the impacts of substantial rate rises and a slowing economy.

“This additional increase in interest rates may slow the current pace of home price growth but is unlikely to deter (these) gains, with strong population growth, tight rental markets and a housing shortfall fuelling further price rises,” said Creagh.

For proof in the pudding, prospective buyers need only look at a handful of popular property areas. For example, Corelogic's data highlights that the New South Wales Central Coast, the eastern suburbs of Sydney, the Mornington Peninsula in Victoria, and Adelaide and Canberra, all remain popular among buyers despite overarching auction clearance rates being relatively subdued. 

The home loan market should also be busy then, which means finding a competitive interest rate remains crucial. Among the more competitive variable interest rates shown in Mozo's database right now are Macquarie Bank's Basic Home Loan at 5.89%, Loans'com.au's Variable Home Loan 90 at 5.79% and Bendigo Bank's Express Home Loan at 5.72%.

Keep in mind that these rates are better than the average, which sits at 6.62%, as per the Mozo database. Fixed home loan rates have been a bit high too, with the two-year fixed average coming in at 6.32%.

When searching for a home loan it truly pays to do some basic comparisons. To get started, why not check some of the best home loans on the market below. 

*Note: The interest rates reported in this article were correct at the time of writing. However, following the RBA’s rate rise, interest rate increases are likely to occur on some home loans.