With so much movement in interest rates recently, a lot of Victorian home buyers, (not to mention homeowners who are wondering whether to refinance), are asking whether they should consider fixing their home loan rate.
Now, our team at Ian Reid Buyer and Vendor Advocates are clearly not mortgage brokers nor financial advisors. However, we do pick up a lot of information in the process of assisting people to buy and sell real estate. So here’s what the overall picture on interest rates looks like at the moment.
The first thing to keep in mind is that the move by the Reserve Bank to raise the cash rate in recent months has been designed to rein in inflation, which has risen due to a rapid rise in economic activity as our nation emerges from the restrictions imposed by the pandemic.
Many analysts expect that the current surge in inflation is likely to be temporary, and that the inflation rate will fall back to the levels we were seeing prior to Covid. If this proves to be the case, borrowers who lock in their home loan at the current fixed rates will regret that decision.
In contrast, if the current inflation rate flows through into higher wages, then our inflation rate will stay higher for longer, leaving those with fixed rate loans feeling far better.
If you take a look at the fixed rate loans being offered at the moment, a three-year fixed rate mortgage on an owner occupied home is currently being offered at around 2%-plus above a comparable variable rate. That means that official interest rates would need to rise steadily by around 1.3% per year for the next three years in order for someone with a fixed rate loan to be breaking even at the end of that three years.
Whilst none of us has a crystal ball, it is clear that the professional financial investors don’t believe interest rates will get that high. In fact, on current figures the bond market is expecting inflation to average just over 3% over the next three years before falling back closer to 2%. This is at the bottom of the Reserve Bank’s target range, so we are more likely to be seeing cuts to official interest rates at that time rather than more rises.
Remember, before you make any decisions about your mortgage, it is worth talking with an independent mortgage broker. Not only can they help you find a loan that best suits your individual priorities and circumstances, but their service won’t cost you any extra, just like having a Vendor Advocate from Ian Reid.
So if you are about to take the next step in your property journey, you can have a confidential chat with one of our team at Ian Reid Buyer and Vendor Advocates by calling 9430 0000 today.
03/28/2025 
