Fixed Versus Variable

The RBA’s decision to leave rates on hold after Melbourne Cup Day, may have signaled the end of the rate reduction cycle. Is now the time to look at fixing my home loan?

In the minutes from the RBA’s November meeting while determining to leave rates on hold, it did give some indication that there is still a slight possibility of further cuts into the New Year

“Given the substantial degree of policy stimulus that had been imparted, it was prudent to hold the cash rate steady while continuing to gauge the effects, but not to close off the possibility of reducing it further should that be appropriate to support sustainable growth in economic activity, consistent with the inflation target,”

In reviewing the minutes some Economist differed in their views of the potential of further rate cuts:

National Australia Bank’s Spiros Papadopoulos, believes the RBA will need to exercise that possibility of cutting rates further as mining investment falls, but there is not enough other business spending to replace it.

“They probably don’t want to cut interest rates again, and that’s why they’re talking up the positives,” he said.

“But obviously if we don’t see the improvement in non-mining investment the unemployment rate will continue to move higher, and that’s why here at the NAB we still believe the RBA will have to cut interest rates again next year.”

Other analysts, such as UBS senior economist George Tharenou, say global factors could help ease some of the pressures constraining Australia’s economy, keeping the RBA sidelined.

“We do think that the RBA will remain on hold for all of next year as they wait for the US central bank, the Fed, to scale back its asset purchase [stimulus] plan and cause the Aussie dollar to depreciate,” he said.

“That would then help to rebalance the Australian economy away from mining, more towards the domestic economy.”

So if our leading Economist cannot agree on what the RBA will do, how are you to know when the time is right to fix?

Firstly you must review your own financial position to determine what is most important to you in your Home Loan, depending on your situation the guarantee of a certain repayment amount over the fixed term may exceed your want to achieve the lowest possible interest rate.

Secondly if you are seriously looking at fixing your home loan then you need to study what the lenders are currently doing with their fixed rates.

Fixed Interest rates have been consistently declining since March 2012, but RBA figures show they started to rise again for the first time in 18 months in September with 8 lenders increasing their rates. In October Canstar reported that a further 82 lenders raised their rates on 258 different lending products.

As lenders move their fixed rates on their predictions of the RBA’s rate movements it is becoming abundantly clear the consensus on the long term is for an upward trend.

Should you wish to review your current financial position in more detail please click here to request a Call Back from a Home Loan Expert from Illawarra Home Loans, or review our competitive product ranger here

To learn more of for a free consultation call Craig Mason:

Office:              02 4226 9977

Mobile:             0414 913 215


  1. Eligibility Criteria, Terms and Conditions, Fees and Charges apply
  2. Based on a loan for an amount of $150,000 secured over a term of 25 years. Warning: the comparison rate only applies to the example or examples given above. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan


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About Martin Anstee

Martin is the Managing Director and co-founder of Illawarra Home Loans.

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