Home loan interest rates to stay at record lows for next two years

HOME loan borrowers can relax for the first time since the global financial crisis with the latest forecast by economists to put a smile on your dial.

Couple outside a new home and they are paying off their mortgage. Picture: iStock.

HOME loan borrowers can relax for the first time since the global financial crisis with experts tipping rates to stay at record lows for at least two years to come.

Economists are forecasting there may be no rate movement until as far away as 2017 which means mortgage customers don’t need to rush to lock in their rate.

AMP chief economist Shane Oliver expects the low-rate environment to hover for some time which is good news for those trying to scale ahead on paying down their mortgage debt.

“The urgency to fix is probably not there, you can probably afford to wait six months because rates aren’t going to go up in a hurry,’’ he said.

“It’s quite possible we won’t see a cash rate hike until 2017, but I can’t rule out another fall.”

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‘Rates aren’t going to go up in a hurry’ ... AMP chief economist Shane Oliver. Picture: Supplied.

The Australian dollar has been above US80 cents this week but is tipped to fall to US73 cents by the end of the year because of higher interest rates in the US.

Slowing economic growth, unemployment above six per cent, falling iron ore prices and benign inflation caused the Reserve Bank of Australia to cut rates this month to a record low two per cent in a bid to stimulate the economy.

Data by financial services firm Canstar found for borrowers with a standard $300,000 30-year loan they can lock in a lower fixed rate than sticking with a variable rate, but not by much.

The average variable rate is 4.73 per cent while two-year fixed rates are 4.6 per, three-year fixed rates are 4.62 per cent.

Five-year fixed rates are 4.9 per cent.

But the firm’s research manager Mitchell Watson said savvier borrowers can score much better deals than this.

“Borrowers can see that there are one, two and three year fixed home loans in the market at below four per cent,’’ he said.

“There are also both basic and standard variable loans on the market at less than four per cent.”

Their analysis found if a borrower locked in the three-year fixed rate at 4.62 per cent and rates didn’t rises again in this time frame they would end up $900 ahead.

No change for the next 18 months ... St George chief economist Hans Kunnen said home loan customers should still consider whether to fix their home loans. Picture: Supplied.

St George Bank’s chief economist Hans Kunnen said he expected the cash rate to stay at this level for at least the next 18 months.

“(Fixing) rates is always a punt, it’s almost like flipping a coin,’’ he said.

“The interest rate markets know as much as we do, they are uncertain, that’s why the rates (fixed and variable) are close.’’

Originally published as Home loan interest rates to stay at record lows for next two years