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RBA holds – but can your bank increase your interest rate anyway?


Lenders have started lifting mortgage rates of their own accord. Your lender may have raised rates already.

The Reserve Bank of Australia has decided to keep the official cash rate at its current historic low of 0.10%.

All the economic experts in Finder's monthly RBA survey predicted today's decision. But while the low cash rate is good news for borrowers (because it helps keep home loan interest rates low), lenders are making rates moves of their own.

As Finder reported last week, lenders have started increasing their fixed home loan interest rates recently. CBA, Westpac Group and UBank all nudged some of their lowest fixed rate loans upward.

While fixed rate loans remain incredibly competitive, these movements are a clear indication that home loan rates are probably headed upward.

This is despite the RBA being very clear that the cash rate will stay at its current level for some time yet.

"The labour market recovery has progressed much quicker than the RBA anticipated," said BIS Oxford Economics principal economist Sean Langcake. "But the economy is still a long way from the conditions the RBA have indicated will precede a rate rise."

The RBA has to consider multiple economic factors when deciding the cash rate. House prices are part of this, but the broader economy matters more. So it's entirely possible for the cash rate to remain low even as house prices skyrocket.

In a statement, RBA governor Philip Lowe said, "Given the environment of rising housing prices and low interest rates, the Bank will be monitoring trends in housing borrowing carefully and it is important that lending standards are maintained."

What should borrowers do?

If you've already fixed your home loan rate, then rising rates won't affect you right now. If you have a variable rate loan you probably don't need to worry: lenders have started lifting fixed rates but not variable rate loans. But it's always good to check your interest rate in case your lender has lifted it.

If you're planning to fix your interest rate soon (or get a home loan for the first time), then it's a really good idea to compare as many offers as possible and make sure you're getting a competitive deal.

Need home loan help? Quickly compare some of the market's lowest rates.

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