What will happen to interest rates in 2017?

Adam Smith 3 January 2017

RBA 2016 in review

The Reserve Bank could put an end to the "new normal" of low rates.

The forecast for interest rates in 2017 has changed drastically since 2016. While last year started with the near-certainty that rock-bottom rates were here to stay, this year begins with lenders having already hiked rates and the Reserve Bank of Australia (RBA) tipped to follow suit.

Low interest rates have been the “new norm” for some time now. The RBA began its current easing cycle all the way back in November 2011. Over the course of the last five years, the RBA has dropped the cash rate from 4.75% all the way to its current 1.50%.

Lenders have largely followed suit, with borrowing rates hitting record lows. But all the while lenders have cut rates, they have also been vocal about the increasing gulf between their funding costs and the Reserve Bank cash rate.

What happened last year

Coming into 2016, the Reserve Bank had maintained a “wait and see” approach for some time. Inflation remained low, but so did unemployment. The housing market had continued booming, and the Reserve worried further rate cuts could cause it to overheat.

At the outset of the year, 56% of the experts surveyed in finder.com.au’s Monthly RBA Survey expected the official cash rate to remain untouched at 2.00% for the duration of 2016. Only 34% foresaw a rate cut during the course of the year, with 52% tipping a rise in 2017.

But the Reserve Bank had some surprises in store for experts. In May, the Bank trimmed the official cash rate to 1.75%. This was in spite of 96% of experts in finder.com.au’s survey forecasting a rate hold. Economists and pundits were certain the RBA would maintain its “wait and see” approach, and hold fire until the Federal Budget. The RBA had other plans.

Home loan rate in review 2016

Along with the Reserve Bank cut came a wave of cuts from lenders, albeit at a slow pace. Lenders seemed to use the opportunity to take a stand on their funding costs. Many failed to pass on the RBA’s full 25 basis point cut. While three of the four major banks did pass on the full cut (ANZ cut by only 19 basis points), they took their time doing so. The big four waited an average of 20 days before passing on rate cuts.

When the lenders did pass on cuts, they did so with a warning: their funding costs were no longer directly tied to the RBA cash rate, so borrowers could no longer expect them to move in lock-step with the Reserve.

For the Reserve Bank’s part, it played to economists’ expectations when it chose to cut rates again in August. It moved on rates after figures from the Australian Bureau of Statistics (ABS) showed the lowest annual inflation rate in more than 17 years.

What 2017 could hold

Lenders stood their ground following August's rate cut, with many passing along half or less of the RBA’s 25 basis point reduction. The major banks averaged just an 11.75 basis point cut, and took between 10 and 21 days to make their changes.

The signal lenders sent in August was an important one. They would willingly suffer consumer ire in order to chart their own course on rates. This mindset was on full display following the final RBA meeting of the year. In spite of the RBA holding rates steady, lenders began to shift their rates upward.

The rate changes began with moves on fixed rates. This soon led to rate hikes for investor variable rates. Finally, lenders began to move variable rates upward for owner-occupiers.

The usual pattern for interest rates has been one of the RBA setting the course and lenders following suit. In 2017, it's possible these roles could be reversed. Lenders have already moved on rates, and 37% of experts surveyed by finder.com.au believe the RBA will follow suit within the next two years.

While the year began with economists predicting an RBA easing cycle continuing into the foreseeable future, most experts now believe the RBA’s next move will be up. After more than five years of easing, the Reserve Bank is tipped to begin tightening the official cash rate once again in 2017 or 2018.

At the outset of 2016, record-low interest rates appeared to the “new normal”. The year ahead appears to be anything but.

Compare today's rates below

Rates last updated November 23rd, 2017
$
Loan purpose
Offset account
Loan type
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Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
3.69%
4.86%
$0
$395 p.a.
90%
A special rate for first home buyers buying residential property and borrowing over $150K. 350K NAB Rewards Points offer available. Terms and conditions apply.
3.65%
3.66%
$0
$0 p.a.
90%
Enjoy a low variable rate with no ongoing fees and borrow up to 90% of the value of the property.
3.64%
3.66%
$0
$0 p.a.
80%
A basic home loan with a competitive rate and low fees.
3.49%
4.47%
$0
$375 p.a.
90%
Discount off an already competitive interest rate for loans over $150k. NSW, QLD and ACT residents only.
3.54%
3.56%
$0
$0 p.a.
80%
Exclusive Offer to finder.com.au

This loan is exclusively available on finder up to and including 22 November (enquiries must be submitted by that date). This loan is for refinancers only. A basic but flexible low-rate loan for refinancers looking to save on repayments.

3.58%
3.59%
$0
$0 p.a.
80%
A competitive variable rate product with low fees offered by a 100% online lender.
3.58%
3.58%
$0
$0 p.a.
70%
A low interest rate home loan with no application or ongoing fees.
3.64%
3.66%
$0
$0 p.a.
80%
A home loan with a competitive variable rate, limited fees and plenty of flexibility.
4.14%
4.14%
$0
$0 p.a.
80%
An investment home loan with competitive rate and 100% offset account.
4.64%
4.01%
$0
$0 p.a.
80%
Enjoy a fast application process and flexible repayment options with this fixed rate investment loan.
3.44%
3.45%
$440
$0 p.a.
80%
This variable loan has a sharp rate, low fees, flexible repayment options and an offset account. This loan is available for PAYG borrowers only.
3.64%
3.64%
$0
$0 p.a.
70%
A low-rate basic home loan requiring a 30% deposit.
3.54%
3.56%
$0
$0 p.a.
80%
For new home buyers only. No refinance option. A low interest variable home loan with no application fee and free redraws. Offer ends 30th Nov.
3.69%
3.72%
$0
$0 p.a.
80%
A low rate home loan with no ongoing fees.
3.69%
4.01%
$0
$299 p.a.
95%
A loan with no application fee and borrow up to 95% LVR.
3.69%
3.69%
$0
$0 p.a.
90%
A special limited time offer for owner occupiers. An IMB Transaction Account must be opened with this loan.
4.19%
4.22%
$0
$0 p.a.
90%
Access a fee-free offset account and a special interest rate for investors.
4.79%
5.44%
$0
$395 p.a.
95%
Package your 4-year fixed rate investment loan and pay no application fees.
3.99%
4.62%
$395
$0 p.a.
80%
Fix your interest rate and pay principal and interest repayments on your investment.
3.62%
3.64%
$0
$0 p.a.
80%
Exclusive Offer to finder.com.au

This loan is exclusively available on finder up to and including 22 November (enquiries must be submitted by that date). This loan is for refinancers only. Switch from your current loan to this low-rate, flexible and feature-packed refinance special.

3.99%
4.00%
$0
$0 p.a.
80%
A low-fee variable rate investor loan with a fast online application process.
3.78%
3.79%
$0
$0 p.a.
95%
A no frills loan with a competitive rate and a maximum LVR of 95%.
3.64%
4.03%
$0
$395 p.a.
80%
Apply for a new owner occupier loan or refinance from another lender and receive this discounted rate.
3.65%
4.84%
$0
$395 p.a.
90%
A 2 years fixed platinum package that has $0 application and a loan redraw facility.
3.74%
3.74%
$0
$0 p.a.
80%
Combine a low variable interest rate and free redraw with no application or ongoing fees.
3.79%
4.11%
$0
$299 p.a.
80%
A fully featured home loan with an offset account and discounts available.
3.77%
3.81%
$200
$0 p.a.
95%
A basic home loan with a low interest rate and a redraw facility available.
3.68%
3.83%
$0
$10 monthly ($120 p.a.)
80%
A low interest rate home loan that allows borrowers to borrow up to 80% of the property value.
3.72%
3.74%
$0
$0 p.a.
80%
Take advantage of a 100% offset account along with no annual or application fees.
3.64%
3.78%
$0
$10 monthly ($120 p.a.)
80%
A competitive variable rate home loan with flexible features. You can earn 30,000 Velocity Points for every $100k you borrow (for a limited time, subject to eligibility requirements).
3.88%
3.81%
$0
$0 p.a.
95%
A competitive 3-year fixed rate loan with a high max insured LVR.
3.72%
3.75%
$600
$0 p.a.
80%
A maximum 80% LVR home loan with no ongoing service fees and a linked transaction account.
3.94%
4.88%
$0
$0 p.a.
90%
Enjoy a low interest rate and borrow up to 90% (with LMI) of your property's value.
3.79%
4.00%
$0
$10 monthly ($120 p.a.)
90%
Get a competitive interest rate for 3 years and a discounted variable rate when the fixed period ends.
3.69%
4.15%
$395
$0 p.a.
80%
A one year fixed rate offer with no ongoing bank fees.
3.84%
3.84%
$0
$0 p.a.
110%
Requires a family member to act as guarantor. Discounted rate available with family pledge loans. Family pledge loans require no LMI and no deposit. NSW, Qld and ACT only.
3.97%
4.02%
$445
$0 p.a.
90%
Get a competitive rate without features you may not use.
3.99%
4.02%
$600
$0 p.a.
90%
Take advantage of a 0.60% discount on your rate, a 100% offset account and no ongoing fees.
3.74%
3.74%
$0
$0 p.a.
90%
A competitive variable rate with a redraw facility. NSW, QLD and ACT residents only.
4.09%
4.11%
$0
$0 p.a.
80%
A low variable rate loan with no application or ongoing fees.
3.69%
4.00%
$0
$350 p.a.
95%
Fix your rate for 3 years and borrow up to 95% LVR.
3.85%
4.18%
$500
$0 p.a.
95%
Apply for Easy Street fixed rate home loans and get a competitive loan with a fixed interest rate.
3.69%
3.75%
$600
$0 p.a.
80%
A low interest rate variable home loan with no ongoing fees.
3.96%
3.98%
$0
$0 p.a.
90%
Take advantage of a redraw facility, competitive variable rate and no application or settlement fees for a limited time.
3.72%
4.19%
$0
$0 p.a.
80%
Enjoy a variable 3 year introductory rate with the Bankwest Equaliser Home Loan.
3.97%
4.02%
$0
$0 p.a.
90%
A low rate variable home loan offer with no monthly fees or application fee charge.
3.84%
4.83%
$0
$0 p.a.
95%
Get a competitive 2-year fixed rate with no application or ongoing fees.
3.88%
4.89%
$0
$395 p.a.
95%
A fixed rate package with flexible repayment options. 350K NAB Rewards Points offer available. Terms and conditions apply.
4.09%
4.12%
$0
$0 p.a.
80%
Access the equity in your home with a competitive interest-only rate and no application fee.
3.69%
4.45%
$0
$375 p.a.
90%
Discount off an already competitive 2 year fixed rate for loans over $150k. NSW,QLD and ACT residents only.
3.97%
3.97%
$0
$0 p.a.
90%
A competitive variable rate home loan with no ongoing fees.
3.73%
3.73%
$0
$0 p.a.
70%
A special low variable rate for owner occupiers with 100% offset account and no application or ongoing fees.
$0
$0 p.a.
A basic low-rate home loan that still offers some useful features.
3.74%
3.74%
$0
$0 p.a.
95%
A low rate home loan with no application or ongoing fees. Note that to be eligible for this loan you must be QLD resident.
4.19%
4.19%
$0
$0 p.a.
90%
Access to redraw facility and offset account without the annual fee.
3.69%
3.69%
$0
$0 p.a.
70%
Enjoy a low variable rate with no application and ongoing fees.
3.79%
3.80%
$0
$0 p.a.
80%
A competitive rate with no ongoing monthly fees or application fees.
3.99%
4.03%
$0
$0 p.a.
95%
Enjoy a basic home loan with a high LVR and no application or ongoing fees.
3.85%
4.95%
$0
$395 p.a.
95%
A discounted package rate for owner occupiers with the ability to package a Qantas rewards earning Amplify credit card. $1,500 cashback available for refinancers. Conditions apply.
3.99%
4.99%
$0
$395 p.a.
95%
A package home loan with fee free extra repayments available during the fixed term.
4.39%
5.42%
$300
$10 monthly ($120 p.a.)
95%
Lock in a competitive fixed rate for 3 years.
3.69%
4.03%
$0
$299 p.a.
80%
Enjoy a low variable rate with no application fee.
3.75%
4.44%
$0
$0 p.a.
95%
This competitive introductory rate is a limited time offer for new owner-occupiers
3.68%
3.69%
$600
$0 p.a.
90%
Get a low variable rate along with some important basic features.

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