40% of Australians think home loan interest rates will rise before 2023

With our property markets booming, the media is full of stories telling us how the Reserve Bank is going to raise interest rates or APRA is going to intervene to slow down our housing markets.

On the other hand, the RBA has stated that it has no intention to raise the cash rate before 2024, however, Australians are calling its bluff taking the view that lenders’ interest rates will increase much sooner.

New research from Canstar shows two in every five, or 40% of adult Australians think home loan interest rates will rise sometime between now and the end of 2022.

The top three reasons for speculation of rising interest rates include our economy will recover by then (at 42% of respondents), inflation is expected to rise (39%) and in order to slow down the property price growth (33%).

Canstar’s Group Executive, Financial Services, Steve Mickenbecker said:

“Pressure is going to start to build on the Reserve Bank and financial regulators to step in if we don’t see the property market start to slow in the next few months.” 

“Australians anticipating lenders interest rates to start rising cite economic growth and inflation as the leading causes. The Reserve Bank’s decision making on interest rates is driven by economic growth and inflation. The Reserve Bank believes that the impressive recovery from the quarterly crash in June last year is low hanging fruit from a low base, and is not sustainable, especially when jobs are hanging in the balance following the end of JobKeeper.

“The wildcard and third reason people cite for rate increases is property price growth. There could be a game of brinkmanship among the regulators and government deciding which of them will fix the emerging social problem of runaway house prices.

“To address rising house prices it’s expected this year there will be a combination of macro prudential measures, tax reform and removal of construction and purchase incentives.The Reserve Bank will not want to move interest rates up too soon as it will impact the Australian dollar and other sectors of the economy.

“First home buyers are feeling the pressure of prices running away from them faster than they can save towards a deposit, and this is feeding housing demand at a time when investors are starting to take interest once again. The competition to buy is seeing properties snapped up before making it to auction.

• Also read:The latest Corelogic Rental Market Report
• Also read:The Boom and Bust of our Property Cycles: A Journey Through the Investor’s Mind
• Also read:Vacancy Rates Remained Steady at 1.0% | SQM Research
• Also read:Dr. Andrew Wilson Decodes the Property News: Find Out What’s Really Coming! | Property Insiders [Video]
• Also read:Perth housing market update | April 2024

“Sooner or later market pressures must slow the rate of house price increases in the absence of immigration, student intake and international tourism, but no government is going to feel good about first home buyers having to find another $30,000 deposit if the property price rises go on for a full year.

“Home loan interest rates continue to fall and rates starting with a one are the new black. Borrowers should be refinancing to a lower rate and not worrying too much about the Reserve Bank’s what, when and why.”

Interest rate moves in March 

The following is a snapshot of interest rate movements in March 2021, according to Canstar data.

Home loans:

• 12 lenders cut 30 variable rates by an average of 0.16%
• 2 lenders increased 2 variable rates by an average of 0.04%
• 25 lenders cut 186 fixed rates by an average of 0.23%
• 13 lenders increased 67 fixed rates by an average of 0.21%
• The lowest variable rate on a $400,000 loan for owner occupiers paying principal and interest is 1.77% (60% LVR) or 1.99% (80% LVR) and the average is 3.28%
• The lowest 3-year fixed rate for owner occupiers paying principal and interest is 1.75%  and the average is 2.28%
• Canstar lists 179 interest rates below 2%, 157 of these are fixed rates and 22 are variable rates.

Savings rates:

• 12 providers cut savings rates in March 2021
• Bonus savings accounts have been cut by an average of -0.11%, while regular savings rates came down by an average of -0.18%
• The highest savings rate is currently 1.50% (available for four months before reverting to 0.25%), or 3% for anyone aged 14 to 24 with up to $10,000 in the bank or 18 to 29 with up to $30,000 in the bank

Term deposit rates:

• 22 providers cut term deposit rates in March, by an average of 0.10%
• 4 providers increased term deposit rates, by an average of 0.22%

Survey findings

About Brett Warren Brett Warren is National Director of Metropole Properties and uses his two decades of property investment experience to advise clients how to grow, protect and pass on their wealth through strategic property advice.