What happened to variable home loan rates after the RBA’s November move
After the Reserve Bank announced another rate rise earlier this month, all four of Australia’s major banks raised their variable home loan rates by 25 basis points.
Why did some fixed rates fall during a period of large rate rises?
Last week, home loan rates did fall, and most news outlets overlooked the fact that some important lending rates actually declined while official news circulated about two large cash rate increases and the four major banks fully following with their variable rates.
A few weeks earlier, Australia’s major lenders had sharply raised fixed rates, so the recent decision to cut some rates was an unexpected reversal. The Commonwealth Bank and Westpac both reduced their four-year loan rates to 4.99%.
What does this mean for borrowers with different loan types?
Most Australian homeowners’ housing loans are variable rate loans. By contrast, in many parts of the United States, housing loans are fixed rate for the entire loan term.
According to Jonathon Mott, an analyst at investment bank Barrenjoey, if the Reserve Bank of Australia continues raising rates at the pace of recent months, a large number of Australia’s new home buyers could ultimately find themselves in difficulty.
There are signs that the recent string of large rate increases may be nearing an end, and it is genuinely possible that rates will be cut next year.
FAQ
Did all four major Australian banks raise variable home loan rates by 25 basis points?
Yes. After the Reserve Bank announced another rate rise earlier this month, all four major Australian banks raised their variable home loan rates by 25 basis points.
Did any home loan rates go down instead of up?
Yes. Last week home loan rates did fall, and the Commonwealth Bank and Westpac both cut their four-year loan rates to 4.99% — an unexpected reversal after major lenders had sharply raised fixed rates a few weeks earlier.
Are most Australian home loans variable or fixed?
Most Australian homeowners’ housing loans are variable rate loans. In many parts of the United States, by contrast, housing loans are fixed rate for the entire loan term.
What could happen if the RBA keeps raising rates at the recent pace?
Jonathon Mott, an analyst at investment bank Barrenjoey, said that if the Reserve Bank of Australia continues raising rates at the pace of recent months, a large number of Australia’s new home buyers could ultimately find themselves in difficulty.