Home loan customers should brace themselves for more rate rises in 2017

MORTGAGE experts are predicting multiple interest rate rises this year which could see the average borrower’s hip pocket hit by an extra $89 per month.

MORTGAGE experts are predicting multiple interest rate rises this year which would see the average borrower’s hip pocket hit by an additional $89 per month.

Home loan customers should brace themselves for several interest rate rises in 2017 which could see the record-low rate environment finally come to an end.

Despite the Reserve Bank of Australia keeping the cash rate on hold at 1.5 per cent since August, industry experts are predicting increases this year that will put further pressure on already squeezed household budgets.

The discrepancies in rate deals across the market remain massive. According to financial comparison site Mozo, borrowers can score variable rate loan offers anywhere from 3.39 per cent to 5.73 per cent.

The site’s spokeswoman Kirsty Lamont believes the cash rate could move upwards at least twice — by 50 basis points — later this year.

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Mozo spokeswoman Kirsty Lamont believes the cash rate will climb in 2017.

“Borrowers should brace for rate hikes this year and factor higher mortgage repayments into their budgets,’’ she said.

“The threat of out-of-cycle rate hikes means borrowers should consider splitting their loan and locking at least half of it in with a competitive fixed rate.”

She urged borrowers not just to settle with a big four lender.

Ms Lamont expects the cash rate to rise from 1.5 per cent to somewhere around 3 per cent within the next five years.

But for savvy home loan customers getting a better deal can be as simple as just asking — which is actually what borrower Stephanie Roberts, 31, did this week after reading a newspaper article on people paying rates that were too high.

This prompted her to take immediate action.

Stephanie Roberts, in Hawthorn, Victoria, who received a discount on her home loan interest rate after asking for one at her bank. Picture: Hamish Blair

“We’ve had our home loan for five years now and I did a search online to see what the better rates were and then I organised a meeting with my bank,’’ Mrs Roberts said.

“I walked into my bank at lunchtime and within about half an hour they dropped my rate from 4.58 per cent to 3.99 per cent and knocked $500 off our interest bill this month.”

Mrs Roberts said the reduction to her variable rate will save her $1482 in interest charges.

Already this month multiple lenders have pushed investment loan rates up outside of any cash rate move including the nation’s largest bank, the Commonwealth Bank, which rose their interest-only investor home loan rates by 0.12 per cent to a new standard variable rate of 5.68 per cent from April 3.

REA Group chief economist Nerida Conisbee doubted the official cash rate would be upped this year, as there weren’t “good enough economic reasons to put a hit on activity”, but she expects banks to increase their rates independently throughout the year.

REA Group first Chief Economist Nerida Conisbee expects banks to raise rates independently of the Reserve Bank of Australia.

However she warned they would be careful about how much they upped their rates, as they wouldn’t want to stop homebuyer activity.

Mortgage Choice spokeswoman Jessica Darnbrough also said global and domestic economic pressures could suggest and banks’ increased funding costs could result in rate rises.

“Borrowers should take the time to review their mortgage needs at least once a year,’’ she said.

The Reserve Bank of Australia board meets again on March 7.

HOME LOAN DEALS (Principal and interest repayments)

On a $300,000 30-year home loan:

Variable rate	Monthly repayments	3 year fixed rate	Monthly repayments
Now — Average	4.41%	$1504	4.11%	$1451
Two rate rises	4.91%	$1594	4.61%	$1540

On a $400,000 30-year loan:

Variable rate	Monthly repayments	3 year fixed rate	Monthly repayments
Now — Average	4.41%	$2005	4.11%	$1935
Two rate rises	4.91%	$2125	4.61%	$2035

On a $500,000 30-year loan:

Variable rate	Monthly repayments	3 year fixed rate	Monthly repayments
Now — Average	4.41%	$2507	4.11%	$2419
Two rate rises	4.91%	$2657	4.61%	$2566

Source: Mozo

Originally published as Home loan customers should brace themselves for more rate rises in 2017