As lenders raise interest rates, the age of low fixed rate loans is over
It’s shocking how many lenders have raised fixed rates today, and by how much.
Several Australian lenders raised their fixed rates on home loans this morning, effectively ending the era of super-low fixed rates for borrowers.
Lenders who have hiked rates in recent days include:
- 86 400
- Tic: Toc
- Adelaide Bank
- Well, home loans
- G&C Mutual Bank
A total of 378 fixed rate loans have increased in the last 2 days, some by as much as 30%. Just yesterday, a 1-year fixed rate from one of these lenders was 2.24%. Now it’s 2.99%.
That’s a big difference from the average borrower. If you took out a $500,000 30-year loan just yesterday, your monthly repayments at 2.24% would be $1,908.
Today, that’s up 2.99% to $2,105 per month. That’s $197 more a month, or $2,364 a year.
What a difference one day can make.
What does this mean for borrowers?
If you’ve already paid off your home loan, you don’t need to worry right now. Once set, the rate will not change until the set period ends.
Borrowers looking for a solution now need to make sure their lender hasn’t hiked rates. If you are about to secure a loan agreement at a good interest rate, it is worth considering a fixed rate fee. This means you’re guaranteed to get the interest rate you signed up for, even if your lender increases interest rates while you’re waiting for the statement.
Adjustable rate borrowers should also check if their lender has recently increased their interest rate. Because you never know when your price may move.
Is this the end of low interest rates?
Interest rates have been rising for some time, particularly fixed rates. Today’s news has definitely made fixed rate loans a much less competitive option for borrowers looking for a low interest rate.
But not every lender has taken a step (although there are likely to be more). And adjustable rate loans are still pretty competitive, almost as low as ever.
Most experts predict that the Reserve Bank will soon raise official interest rates. This will also drive up variable interest rates. While the age of rock-bottom interest rates isn’t quite over, today’s moves are another sign that everyone’s home loans are about to get more expensive.
Looking for a cheaper rate? Check out some of the lowest rates on the market.