Interest may rise even if rates on hold
Though the cash rate is predicted to remain unchanged at tomorrow’s Reserve Bank meeting, borrowers should watch out for out-of-cycle home loan hikes, a loan comparison website has warned.
A survey by finder.com.au of 12 economists at Australia’s major banks and non-bank lenders found all expected rates to remain unchanged tomorrow.
Five predicted rates would rise by the end of this year, three believed there would be no change until 2015, and four were unsure of the next movement.
Nonetheless, finder.com.au money expert Michelle Hutchinson said borrowers should be on alert, since several variable home loans have moved independently of the Reserve Bank in recent times.
She said despite a period of stability in the cash rate, five lenders have increased their interest on home loans by up to 0.10 percentage points this year.
“We’ve also seen seven lenders drop 20 home loans this year by as much as 0.17 percentage points,” she said.
She warned even a small change could have a significant impact on a family’s budget.
“Even a small hike of 0.10 percentage points can make a big difference to the cost of a home loan,” she said.
“For instance, for a $300,000 mortgage, that’s worth about $19 extra per month, or almost $7,000 over 30 years.”
She recommended borrowers keep an eye on their rates, compare their loan to those offered by other lenders and negotiate or switch to secure the best deal.