What will happen to interest rates in 2017?

Adam Smith 3 January 2017 NEWS

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 May 21st, 2018
$
Loan purpose
Offset account
Loan type
Your filter criteria do not match any product
Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
3.69%
3.69%
$0
$0 p.a.
80%
Refinance to a UBank loan and you could get $1,000 in your USaver account (offer conditions apply). Enjoy flexible repayments, a redraw facility and the ability to split your loan. Plus, pay no application or ongoing fees.
3.64%
3.67%
$0
$0 p.a.
80%
A mortgage with a competitive variable rate, limited fees and plenty of flexibility.
3.69%
3.69%
$0
$0 p.a.
70%
Pay no application or ongoing fees and get a flexible loan with the ability to split up to 6 times.
3.64%
4.03%
$0
$395 p.a.
80%
New borrowers or refinancers from another lender get a discounted rate with this package loan.
3.64%
3.84%
$0
$0 p.a.
70%
Enjoy all the benefits of the Basic Home Loan and take advantage of an offset account.
3.68%
3.83%
$0
$10 monthly ($120 p.a.)
80%
Get a 100% offset account to save on interest charges, and pay no application fee.
3.69%
3.71%
$0
$0 p.a.
80%
A low rate variable home loan offer with no monthly fees or application fee charge.
3.69%
4.06%
$0
$349 p.a.
90%
Package your loan with other AMP products and save on rates and fees.
3.70%
4.13%
$0
$395 p.a.
90%
Package your loan with an eligible credit card for discounts on rates and fees, and get a 100% offset account.
3.49%
4.49%
$0
$395 p.a.
90%
Loans over $150k get a discount off an already low fixed rate. Available for NSW, Qld and ACT residents only.
3.79%
3.79%
$0
$0 p.a.
80%
Pay no application and ongoing fees with Macquarie Bank Basic Home Loan.
3.52%
3.53%
$0
$0 p.a.
80%
Go from application to approval in as little as 20 minutes with a variable rate loan from this innovative online lender. Add a 100% offset account for $10 a month.
3.79%
4.06%
$0
$20 monthly ($240 p.a.)
80%
Add a Platinum Rewards Mastercard with this package loan and you could earn 150,000 Bendigo reward points (Victoria only, terms and conditions apply).
3.69%
4.86%
$0
$395 p.a.
90%
Start your home buying journey with 2 years of fixed repayments and a reasonable rate from a big 4 bank. Available with a 10% deposit.
3.77%
3.81%
$200
$0 p.a.
95%
A simplified mortgage with a low interest rate and a redraw facility.
3.68%
3.69%
$0
$0 p.a.
95%
This variable rate loan offers flexible repayments and a redraw facility. Available with a 5% deposit.
3.69%
3.73%
$600
$0 p.a.
95%
Variable rate home loan from one of the big 4 banks. Available with just a 5% deposit.
3.58%
3.58%
$0
$0 p.a.
70%
A low interest rate home loan with no application or ongoing fees.
3.68%
3.69%
$0
$0 p.a.
90%
Get one free online redraw per month and pay no ongoing fees. Application fees are waived for loans above $150,000.
3.87%
3.87%
$0
$10 monthly ($120 p.a.)
90%
Get Virgin Velocity Points at settlement, monthly and every three years, plus the option to make up to $10,000 a year in extra repayments.
3.69%
3.74%
$600
$0 p.a.
80%
A competitive variable rate for borrowers with a 20% deposit or more. Guarantor option available.
3.69%
4.04%
$0
$350 p.a.
95%
A competitive rate with no application fee.
3.69%
4.11%
$0
$395 p.a.
80%
Save on interest with a 100% offset account and save on other ME products with this package loan.
3.65%
3.66%
$0
$0 p.a.
80%
This special rate loan comes with no application or ongoing fees, and offers a flexible repayment schedule.
3.96%
3.98%
$350
$0 p.a.
90%
For a limited time, pay no application or settlement fees. You can also take advantage of a free redraw facility.
3.69%
3.94%
$0
$248 p.a.
70%
Get a sharp rate and a 100% offset account. Borrowers must have a 30% deposit.
3.62%
3.62%
$0
$0 p.a.
80%
Pay no application or ongoing fees and get access to a redraw facility and flexible repayment schedule. Refinance to a UBank loan and you could get $1,000 in your USaver account (offer conditions apply).
3.62%
3.62%
$0
$0 p.a.
95%
Free home and contents insurance for 1 year. Terms and conditions apply. QLD residents only.
3.73%
3.73%
$0
$0 p.a.
80%
Get a 100% offset account and pay no application or ongoing fees on this special variable rate for owner-occupiers.
3.79%
3.83%
$600
$0 p.a.
80%
A low interest rate loan with limited fees and a redraw facility. Principal and interest repayments only.
3.74%
3.74%
$0
$0 p.a.
110%
Pay no deposit or LMI and get a discounted rate with this family pledge loan. Requires a family member to act as guarantor. NSW, Qld and ACT only.
3.78%
3.78%
$0
$0 p.a.
80%
Pay no application or ongoing fees and get access to a free redraw facility with this innovative online lender.
3.89%
3.89%
$0
$0 p.a.
70%
Investors with a 30% deposit can get this low rate property investment loan.
3.90%
4.78%
$600
$0 p.a.
95%
A competitive fixed rate mortgage with split facilities and extra repayments. You can get this loan with a 5% deposit.
3.99%
5.17%
$600
$0 p.a.
90%
Competitive rates for fixed for 3 years with redraw facility.
3.74%
3.74%
$0
$0 p.a.
90%
New customers can get a discounted variable rate and a fee-free redraw facility. NSW, QLD and ACT residents only.
4.09%
4.12%
$0
$0 p.a.
95%
Buy a home with just a 5% deposit and get flexible repayment options and a redraw facility.
3.59%
4.14%
$395
$0 p.a.
80%
A one year fixed rate offer with no ongoing bank fees.
4.14%
4.14%
$0
$0 p.a.
80%
Investors pay no application or ongoing fees on this loan from an innovative online lender.
3.74%
4.01%
$395
$0 p.a.
80%
A competitive 3 year fixed rate with no ongoing bank fees.
3.88%
4.89%
$0
$395 p.a.
95%
Low deposit home loan. Enjoy flexible repayment options while paying limited fees.
3.99%
4.62%
$395
$0 p.a.
80%
Investors can enjoy flexible repayments and an easy application process with this pioneering online lender.
3.99%
4.86%
$0
$0 p.a.
80%
Access a fee-free 100% offset account and pay no application or ongoing fees.
3.89%
4.87%
$0
$0 p.a.
90%
Borrow up to 90% of the value of the property you're buying and pay no application or ongoing fees.
3.64%
3.64%
$0
$0 p.a.
70%
Get a discount for keeping your LVR at 70% or below with this innovative online lender.
3.85%
4.05%
$0
$350 p.a.
95%
This high LVR fixed rate loan allows you to borrow up to 95% of the value of the property you're buying.
4.09%
4.11%
$0
$0 p.a.
80%
This variable rate loan keeps the features simple and fees low. This loan is offered by a 100% online lender.
3.99%
3.99%
$0
$0 p.a.
80%
Get a discounted, low-fee investor loan from a convenient online lender. 20% deposit required. Refinance to a UBank loan and you could get $1,000 in your USaver account (offer conditions apply).
3.69%
4.47%
$0
$395 p.a.
90%
A fixed rate loan with a 100% offset account and the option to make additional repayments. Loans over $150k receive a discounted rate. NSW, QLD and ACT residents only.
3.85%
4.82%
$600
$35 monthly ($420 p.a.)
90%
Make up to $10,000 in extra repayments per year and take advantage of a flexible repayment schedule.
3.79%
3.80%
$0
$0 p.a.
70%
Keep your LVR at 70% or below and enjoy a special discounted rate. Also, pay no application or ongoing fees.
3.99%
4.03%
$0
$0 p.a.
95%
Buy a home with just a 5% deposit and pay no application or ongoing fees.
3.89%
4.96%
$0
$395 p.a.
95%
Refinancers can get $1,500 cashback. Conditions apply. Package your home loan with a Qantas rewards earning Amplify credit card.
3.89%
4.97%
$0
$395 p.a.
95%
Get discounts on a range of Commonwealth Bank products and enjoy the option of fee-free extra repayments during the fixed term.
4.09%
3.79%
$0
$0 p.a.
70%
A competitive 3-year fixed rate loan with a high max insured LVR.
3.64%
3.65%
$0
$0 p.a.
95%
Family pledge option available. Get a special discount off Bank of Melbourne's basic variable rate.

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