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 August 21st, 2018
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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
3.64%
3.66%
$0
$0 p.a.
80%
Competitive interest rate and limited fees
A simple mortgage with a competitive interest rate and no application or monthly fees. Borrow up to $2 million from a convenient online lender.
3.59%
3.59%
$0
$0 p.a.
80%
Special discounted interest rate
Enjoy flexible repayments, a redraw facility and the ability to split your loan. Plus, pay no application or ongoing fees.
3.64%
3.65%
$0
$0 p.a.
80%
Get approved faster with a speedy online application
Low interest rate and limited fees. Add a 100% offset account for $10 a month.
3.69%
4.11%
$0
$395 p.a.
80%
Save on interest with a 100% offset account
Unlock a range of savings with this competitive package home loan offer. Offset account and redraw facility included.
3.70%
3.90%
$0
$0 p.a.
70%
Requires a 30% deposit
Enjoy all the benefits of the Basic Home Loan and take advantage of an offset account.
3.49%
4.57%
$0
$395 p.a.
90%
Save on interest with a 100% offset account
Loans over $150k get a discount off an already low fixed rate. Available for NSW, QLD and ACT residents only.
3.75%
3.75%
$0
$0 p.a.
70%
This sharp rate product requires a 30% deposit
Pay no application or ongoing fees and get a flexible loan with the ability to split up to 6 times.
3.84%
3.84%
$0
$0 p.a.
80%
Low fee online mortgage
Pay no application or ongoing fees and get access to a free redraw facility with this innovative online lender.
3.71%
3.71%
$0
$0 p.a.
70%
A variable rate home loan that has a lot of flexible features. This loan has a 100% offset account.
3.64%
3.68%
$0
$0 p.a.
80%
A competitive interest rate for first home buyers that keeps fees low. You will need a 20% deposit and can borrow up to 500000.
3.68%
3.82%
$0
$10 monthly ($120 p.a.)
80%
Earn Velocity Frequent Flyer Points with this mortgage to spend on flights and more (subject to eligibility requirements). Redraw facility available on this variable rate home loan. Competitive interest rate.
3.72%
4.10%
$0
$395 p.a.
80%
100% offset account plus package discounts
New borrowers or refinancers can get a discounted rate with this package loan. Bonus $1,500 cashback for refinancers.
3.64%
3.79%
$0
$10 monthly ($120 p.a.)
70%
100% offset account and a competitive rate
Low rate, low fee loan for owner-occupiers. You will need a 30% deposit to get this mortgage.
3.54%
3.59%
$0
$0 p.a.
80%
$900 cashback offer on settlement
Get a competitive rate, save on fees and access a 100% offset account plus redraw facility.
3.65%
3.66%
$0
$0 p.a.
90%
Competitive interest rate and low fees. Available with a 10% deposit. Partial offset account attached (offset up to $15,000).
3.70%
4.13%
$0
$395 p.a.
90%
Get this loan with a 10% deposit
Package your loan with an eligible credit card for discounts on rates and fees, and get a 100% offset account.
3.64%
3.78%
$0
$10 monthly ($120 p.a.)
80%
Earn thousands of Velocity Frequent Flyer Points on your mortgage (subject to eligibility requirements). Plus, access a 100% offset account to save on interest.
3.64%
3.64%
$0
$0 p.a.
70%
A low interest rate home loan with no application or ongoing fees.
3.65%
3.66%
$0
$0 p.a.
80%
Sharp interest rate and low fees
This special rate mortgage has no ongoing fees and offers flexible repayments. Save $595 in establishment fees before 30 September.
3.59%
3.99%
$600
$395 p.a.
95%
Get interest rate discounts and waived fees on this package loan with a 100% offset account.
3.88%
4.40%
$0
$395 p.a.
90%
Lock in a very competitive 2 year rate and get package discounts on your credit card and offset account.
3.85%
3.85%
$0
$0 p.a.
80%
Flexible, low fee mortgage
Pay no application and ongoing fees with Macquarie Bank Basic Home Loan. Split and redraw facilities included.
3.64%
3.64%
$0
$0 p.a.
70%
A basic variable home loan that offers a competitive interest rate with no application fees and no ongoing fees.
3.64%
3.79%
$0
$0 p.a.
80%
Apply online for this fixed rate, low-fee loan with redraw facilities and an optional offset account.
3.98%
4.41%
$0
$395 p.a.
90%
Take advantage of a low 3 year fixed rate, 40% offset account and no application fee.
3.72%
3.74%
$0
$0 p.a.
80%
100% offset account and a 10% deposit option
Save on interest by taking advantage of a 100% offset account along with no ongoing fees or application fees.
3.84%
3.82%
$0
$0 p.a.
80%
A fixed rate loan with free redraws, few ongoing fees. Apply online with a fast approval process.
3.89%
3.94%
$0
$0 p.a.
80%
Sharp fixed rate loan
Pay no application or ongoing fee and borrow up to 80% LVR.
3.74%
3.74%
$0
$0 p.a.
80%
A basic owner-occupier home loan with a low variable rate that requires a 20% deposit.
3.59%
4.74%
$0
$395 p.a.
90%
Get this package loan with a 10% deposit
Enjoy a competitive rate with no application fee for this package loan.
3.79%
3.79%
$0
$0 p.a.
80%
Minimal fees and a 100% offset account
Access an offset account and pay no application or ongoing fees on this special variable rate for owner-occupiers.
3.88%
3.89%
$0
$0 p.a.
90%
Low deposit, low rate mortgage
Save on interest with a free 100% offset account and buy your property with just a 10% deposit.
3.74%
3.74%
$0
$0 p.a.
110%
Borrow up to 110% with a guarantor
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.
3.76%
4.15%
$0
$395 p.a.
90%
Discount special offer with a 100% offset account
A high maximum LVR home loan with redraw facility and additional payments. Get this mortgage with a 10% deposit.
3.67%
3.69%
$0
$0 p.a.
80%
Low interest rate for new customers
Family guarantee option available. Enjoy flexible repayments and a low minimum loan amount.
3.81%
3.81%
$0
$0 p.a.
80%
A home loan with a competitive rate and plenty of handy features. This product comes with a 100% offset account.
3.64%
3.69%
$600
$0 p.a.
80%
Low fees and low interest rate
A competitive variable rate for borrowers with a 20% deposit or more. Guarantor option available.
4.04%
4.07%
$0
$0 p.a.
90%
Get this loan with a 10% deposit
For a limited time, pay no application or settlement fees. You can also take advantage of a free redraw facility.
3.97%
3.99%
$0
$0 p.a.
80%
Competitive investment package loan
Package your owner occupied loan with investment loan and receive a discounted investment rate. 100% offset account included.
3.72%
4.11%
$0
$349 p.a.
90%
10% deposit option available
Package your loan with other AMP products and save on rates and fees.
3.75%
4.00%
$0
$248 p.a.
70%
100% offset account included
Borrowers with a 30% deposit can get this competitive rate.
3.62%
4.49%
$0
$0 p.a.
90%
Get a competitive rate and avoid ongoing fees. This loan is only available to current and former employees of eligible Queensland government organisations.
4.09%
4.11%
$0
$0 p.a.
80%
Simple residential mortgage product
This variable rate loan keeps the features simple and fees low. This loan is offered by a 100% online lender.
3.89%
3.94%
$0
$0 p.a.
90%
Available with a 10% deposit
Borrow up to 90% of the value of the property you're buying, and pay no application fee.
3.68%
3.69%
$0
$0 p.a.
90%
Available with a 10% deposit
Get one free online redraw per month and pay no ongoing fees. Application fees are waived for loans above $150,000.
3.93%
3.94%
$0
$0 p.a.
80%
Use your home equity with a low rate
A low-fee line of credit loan from an online lender. Unlock the equity in your home and make interest-only repayments with a competitive rate.
3.99%
5.35%
$600
$0 p.a.
90%
Available with a 10% deposit
Competitive rates for fixed for 3 years with redraw facility.
3.99%
3.99%
$0
$0 p.a.
70%
Save on fees with this investor mortgage
Investors with a 30% deposit can get this low rate loan to fund their property portfolio.
4.13%
4.14%
$0
$0 p.a.
90%
Available with a 10% deposit
Access a fee-free offset account and a special interest rate for investors.
3.83%
3.83%
$0
$0 p.a.
90%
Special discount rate
New customers can get a discounted variable rate and a fee-free redraw facility. NSW, QLD and ACT residents only.
4.24%
4.27%
$0
$0 p.a.
95%
Low deposit loan for investors
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%
Competitive interest rate
A one year fixed rate offer with no ongoing bank fees.
3.89%
4.94%
$595
$0 p.a.
90%
10% deposit option available
Borrow up to 90% of the value of the property you're buying and pay no application or ongoing fees.
3.74%
4.01%
$395
$0 p.a.
80%
Lock in a low rate for 3 years
A competitive fixed interest rate product with no ongoing bank fees.
4.18%
4.18%
$0
$0 p.a.
80%
Competitive investment mortgage
Investors get a 100% offset account and pay no application or ongoing fees on this loan from an innovative online lender.
3.99%
4.86%
$0
$0 p.a.
80%
Fix your rate for 2 years
Access a fee-free 100% offset account and pay no application or ongoing fees.
3.99%
4.62%
$395
$0 p.a.
80%
Flexible fixed investment loan
Investors can enjoy flexible repayments and an easy application process with this pioneering online lender.
3.70%
3.70%
$0
$0 p.a.
70%
You need a 30% deposit to get this mortgage
Get a discount for keeping your LVR at 70% or below with this innovative online lender.
3.99%
3.99%
$0
$0 p.a.
80%
Special discounted interest rate
Get a discounted, low-fee investor loan from a convenient online lender. 20% deposit required.
3.69%
4.54%
$0
$395 p.a.
90%
10% deposit option available
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.
4.29%
4.26%
$0
$0 p.a.
95%
A competitive 3-year fixed rate loan with a high max insured LVR.

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