Reserve Bank of Australia (the RBA) announced at 2.30 this afternoon that the cash rate will rise by 0.25%, to 4.00%.

This is somewhat of a double-edged sword for mortgage-holders. While it will mean that home loan repayments will rise, it is a further sign that the Australian economy continues to perform well, particularly in areas such as unemployment.

Despite today’s increase, our research shows that interest rates are still ‘cheap’ or below historic averages.

We have been tracking one of the major banks "basic variable" interest rate movements for just over 10 years and the chart below demonstrates this history. It is interesting to note that the 10 year average is around 6.6%. In fact, one of our major lenders still has a basic variable interest rate of 5.96%. There is also an offer of 5.72% (from a major bank) if you are borrowing less than three quarters of the property value and your loan is greater than $250,000.

The last few RBA board meetings have all discussed the need for interest rates to return back to "normal levels" if the economy still shows signs of expansion. According to our figures we are only around 0.60% from the medium term average.

As promised, I have also included the fixed vs variable rate chart for your interest. Fixed rates continue to remain well above the variable rates.

As always, if you would like to discuss anything in relation to the above, please shoot me back an email and I will give you a call.
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