Rate hikes on the horizon, says mortgage boss

The chief executive officer of one of Australia’s largest mortgage brokerages has said that it is “very likely” that home loan rates have hit the bottom of the interest rate cycle.

Mortgage Choice CEO John Flavell said he believes Australia’s lenders are soon to start raising their interest rates, in light of a speculated rate hike by the United States’ Federal Reserve at its board meeting on 14 December.

“Furthermore, other central banks from across the globe are now signalling that the bias for easing monetary policy is over,” he added.

“Closer to home, the Reserve Bank of Australia strongly suggested at its November board meeting that the time for easing monetary policy has now passed.”

Mr Flavell concluded that it was “very likely” that home loan rates have already hit the bottom of the interest rate cycle, with lenders poised to start increasing rates in the near future.

“The fact that we have seen some lenders starting to increase their fixed rate pricing would suggest we have hit the bottom of the rate cycle, and are now at the point where rates will soon rise,” he elaborated.

However, Mr Flavell emphasised that that even if rates do rise, interest rates are still “incredibly low by long-term standards”.

“Even if rates do rise over the coming months, they will continue to hover around all-time lows,” he said.

He advised borrowers who are concerned about the trajectory of their home loan interest rate to potentially look to fix all or part of their mortgage.

“There is a case to lock in to a fixed rate mortgage while home loan rates are still sitting below 4 per cent. By locking into a fixed rate mortgage, borrowers could beat any potential rate rises,” he said.

“In addition to avoiding future rate rises, borrowers who choose to fix their mortgage will be given a sense of security around their ongoing mortgage repayments.”

 [Related: Rates hikes and ‘significant power’ of majors under scrutiny]

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Francesca Krakue

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