Fixed rates are on the rise, steps to do now
Commonwealth Bank (CBA) economists have brought forward their forecasted Reserve Bank of Australia (RBA) cash rate hike from August to June, making it the earliest prediction amongst the big four banks.
Many of us have definitely noticed fixed rates trending up in recent months by all banks. So if you have been thinking of fixing your rate lately, you’ll want to get in touch with us sooner rather than later.
For example, back in November 2021, 80% loan-to-value ratio, home loan of $500K, the 2 years fixed rate can be as low as 1.84%. That rate has since gone up to 3.04% – a staggering increase.
While not every lender has increased fixed rates so significantly, we are seeing them go up across the board. But we also see few lenders have recently reduced their variable rates to compensate the fixed rate hike but as cash rate is being tipped to increase mid-year, we can expect variable rates to increase with the cash rate.
Steps we can do now to minimise impact on this rate hike?
As inflation is a lot stronger than the RBA’s forecast, we will see RBA increase cash rate to curb the explosive economy. Experts are expecting a further 3-4 rate increases over 2022 to take the cash rate to 1%.
There will be many mortgage holders out there who have never experienced a rate rise (the last RBA cash rate hike was in November 2010) and if CBA’s prediction of these rate hikes over the next 12 months come true, then many households will be in for a bumpy ride as this rate will result in hundreds of dollars in extra mortgage repayments each month.
So if you want to minimise this impact of rate hike on your family budget, now is time to chat with CWF. We can help you work through your options in advance.