You’re not alone if you sighed in relief earlier this month, as the RBA announced the cash rate would remain on hold for the second consecutive month.
This hasn’t stopped some lenders from hiking their variable home loan rates anyway.
These rate hikes – sometimes known as ‘out-of-cycle’ rate rises – easily fly under the radar. Especially when we’ve all been getting regular letters in the mail advising our interest rate (and repayment) is about to increase again.
Out of interest, how many of you are still opening – and reading – these letters?
Can lenders change interest rates independent from the RBA cash rate changes?
Yes! Unfortunately lenders can do whatever they want with their interest rates.
And whilst we’ve seen lending variable rates move in line with RBA cash rate changes recently, this hasn’t always been the case.
Not that long ago, it was pretty common for lenders to pass on varying amounts of the RBA rate change.
For example, let’s say the RBA increased the cash rate by 0.50.
Lender A might announce their variable rates were increasing by 0.50. Lender B might decide to pass on 0.30 of the cash rate increase, whilst Lender C may only increase their lending rates by 0.25.
This doesn’t mean that Lender C always offered the most attractive rates though. Because the next time the RBA increase the cash rate, Lender C was more likely to pass on a higher amount of the rate increase to balance things up.
The lenders who announced the rate change first, often copped the most flack in the media. So it’s not surprising that the first lender to move one month, was typically not the first to move on rates the following month.
As rates start to stabilise, we may see more of this happening again. Especially if specific lenders are trying increase their market share/profit margins at specific points in their reporting cycles.
How are home owners navigating higher interest rates?
In an attempt to manage higher repayments, mortgage holders are:
– stopping (or reducing) their extra repayments;
– tapping into offset funds/savings to help cover repayments;
– refinancing to a lower rate loan;
– extending their loan term; and/or
– some have had to sell property to ease the financial burden
How are *you* navigating higher loan repayments?
Whilst lenders can do whatever they want with their interest rates, you don’t necessarily have to cop it.
First step is to reach out to our team for a home loan review. We’d love to help you save some interest.
You can get started here or give us a call on 02 6286 6501.