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December 16

Newsletter #87

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Could our record-low interest rates be on the upswing? According to Mortgage Choice chief executive officer John Flavell, Australia’s lenders could soon begin increasing their rates. Flavell says it’s “very likely” that home loan rates have already hit the bottom of the interest rate cycle. “There is growing speculation that the United States’ Federal Reserve will lift the official cash rate at its next board meeting on December 14,” he said. 

“Furthermore, other central banks from across the globe are now signalling that the bias for easing monetary policy is over. Closer to home, the Reserve Bank of Australia strongly suggested at its November board meeting that the time for easing monetary policy has now passed. This idea is supported by the fact that long-term bond rates have started to move slightly higher and we’ve already seen increases in some of the fixed rates on offer domestically.”

Westpac joined the ranks of lenders hiking up interest rates on fixed-rate home loans and investment property loans, rising rates on two, three and five year products. Other lenders with fixed rate increases include the Bank of Queensland, Bank of Sydney and ME Bank, which also increased its variable rates by up to 10 basis points – the first hike in a variable loan in the latest round of increases.  

“Of course, even if rates do rise in the near future, it is important that borrowers don’t panic,” said Flavell. “The reality is, interest rates are incredibly low by long-term standards. So, even if rates do rise over the coming months, they’ll continue to hover around all-time lows.”

In New Zealand property news, it appears that the previously skyrocketing Auckland housing market has eased off a little, giving buyers a much-needed break. Mortgage advisor for Loan Market, Bruce Patten, said that while prices may not be falling, they are certainly levelling off, with only about half of properties selling at auction while earlier this year rates were as high as 85 percent. "It's really a restructuring time for vendors to bring their expectations back to the real market and purchasers have said enough's enough." Some of the power is back in the hands of buyers who can now offer more realistic prices instead of being forced up or pushed out at auction. Sticker prices are now more common in central parts of the city as houses fail to sell under the hammer.

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