Low interest rates the ‘new normal’

AUSTRALIANS should expect lower home loan rates to be “the new normal” and stay well below the 50-year average of about seven per cent.

Home loan and Australian cash. Picture: iStock

HOME loan interest rates are tipped to stay at historical lows for the next decade allowing borrowers to scale well ahead of their loans.

Australians should expect lower rates to be “the new normal” and stay well below the 50-year average of about seven per cent.

1300homeloan director John Kolenda said borrowers had become used to the record-low rates and said many households had adopted a frugal approach since the global financial crisis.

“The new norm of the future will see variable rates stay below 7 per cent with an average far less than the historical past,’’ he said.

“Post-GFC we have seen a dramatic change in consumer behaviour as they prefer to save money and spend wisely versus the credit spending frenzy for the decade before.”

Interest rates hovered around the 17 per cent mark in the early 1990s.

All of the nation’s big banks are among 18 lenders who will or already have hiked interest rates across their variable owner occupier and investor loans by January.

Soft economics conditions, the slowdown in China and the rest of Asia remains a big concern for the Reserve Bank of Australia who meet for the last time this year on Tuesday.

It’s expected they will keep the cash rate at a historical low of two per cent.

RBA governor Glenn Stevens hasn’t ruled out cutting the cash rate again but said he will “chill out” until the bank’s first board meeting in February in 2016.

The last cut was in May.

St George Banking Group’s chief economist Hans Kunnen said borrowers should expect to enjoy low rates for some time yet.

“A mix of low inflation, good central bank controls and the GFC is right — the whole structure of interest rates will be lower over the next decade than it was in those horror periods,’’ he said.

Financial comparison website figures by InfoChoice show on a $300,000 30-year home loan the average standard variable rate is 4.96 per cent and the monthly repayments are $1603.

On a three year fixed loan the average rate is 4.49 per cent and monthly repayments are $1518, while on five year fixed offerings the average rate is 4.83 per cent and monthly repayments are $1579.

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Originally published as Low interest rates the ‘new normal’