Mortgage costs could rise despite rate fix

The surprise move by the Reserve Bank of Australia (RBA) to fix the country’s cash rate may not stop mortgage holders being subjected to increasing interest rates.

According to Loan Market Group executive chairman Sam White, the decision to fix the rate at 3.75 per cent will allow the bank to assess the effectiveness of the three consecutive 25-basis point rises introduced last year.

"What they’re trying to do is assess the impact of the previous rises," he said.

Adding: "Australians are also coming back from holidays. The RBA will also be assessing how much credit card debt has built up over the festive season."
However, he added that consumers can expect further rate rises in the coming year, which could push up the cost of mortgages and loans.
"The bank is just waiting for more information before it moves again," he concluded.

Despite the potential for rate rises in the near future, independent home loan broker Mortgage Choice said that just one per cent of Australians opted for a fixed-rate mortgage product in December of last year.

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