Homeowners who have already switched from variable interest-rate mortgages to fixed rates appear to have made the right call.
That is particularly so for those who fixed for a term of three years between the start of the coronavirus pandemic in early 2020 and September of last year, just before fixed rates started to rise.
What happens with Interest rates is hostage to the COVID-19 wildcardCredit:Peter Rae
Figures from RateCity show the average three-year fixed-rate mortgage from the big banks was about 2 per cent over that period, but has since moved about one full percentage point higher.
Last week, Westpac economists tipped the Reserve Bank of Australia (RBA) to hike official interest rates from 0.1 per cent to 0.25 per cent in August, followed by a larger 0.25 percentage point hike in October. They had earlier not been expecting rates to start rising until early 2023.
The economists see the cash rate rising even further to 1.75 per cent by early 2024. That has made homeowners nervous, particularly those who have purchased recently with large mortgages.
However, the RBA still maintains it will not start lifting rates until late 2023 or, more likely, 2024.
Inflation is rising quickly overseas, particularly in the US, and is advancing here, too. Australian Bureau of Statistics figures released on Tuesday showed the consumer price index rose 3.5 per cent in 2021.
Underlying inflation was 2.6 per cent last year, when the market was expecting 2.3 per cent. It is the highest rate of growth since 2014.
The RBA aims to maintain underlying annual inflation at between 2 per cent and 3 per cent over the economic cycle.
Rate hike warning makes homeowners nervous
Source: Philippines Alive
