Don’t panic: more borrowers concerned for rising interest rates
- All 34 experts in the finder.com.au Reserve Bank Survey were all correct with cash rate hold today
- 33% more borrowers concerned for rising interest rates
- Don’t freak out: borrowers should prepare now for rate hikes
June 2, 2015, SYDNEY, AUSTRALIA – A new study by one of Australia’s biggest comparison websites finder.com.au shows that more borrowers are concerned about rising interest rates compared to last year, despite over three years of rate cuts and the Reserve Bank holding the cash rate at a record low of 2.00 percent at its board meeting today (June 2, 2015).
All 34 leading experts and economists in the finder.com.au Reserve Bank survey, which is the biggest of its kind in the country, were correct with their prediction that the cash rate would remain on hold today.
The Survey also found that 23 experts (68 percent) are forecasting the cash rate to start rising next year, and another eight (24 percent) expect the cash rate to start rising beyond 2016.
One expert is forecasting a cash rate increase as early as October 2015 – Mark Crosby, Associate Professor of Economics at Melbourne Business School.
Michelle Hutchison, Money Expert at finder.com.au, said that rising interest rates will be a shock to many borrowers.
“There’s no doubt it will be a shock to the system for many borrowers when interest rates rise. We haven’t seen a rising interest rate cycle for almost five years, as the last time there was a cash rate hike was in November 2010. There are 419,566 first home buyers who have never experienced what it’s like to pay higher repayments.
“Many households are also borrowing more money and purchasing more expensive properties than ever before. For instance, the average first home buyer loan size has increased by $37,000 (13 percent) to a record high of $326,000 in March 2015. So it’s no surprise to see in our new study an increase in the number of borrowers who are concerned about rising interest rates.”
The study of more than 1,100 Australians who have recently purchased a property or planning to buy in the near future, found more than half of borrowers (56 percent) are concerned about rising interest rates – 33 percent more borrowers than last year.
Sydneysiders are most concerned about rising interest rates than any other city, with 59 percent concerned, followed closely by households in Melbourne and Brisbane (both with 58 percent) while Adelaide borrowers (or prospective buyers) are least concerned than other cities – however half are concerned about rising rates (50 percent).
Almost one in three (28 percent) of borrowers or those planning to buy a property are choosing to fix their home loan, while one in four (25 percent) are choosing to split their loan with part fixed and part variable.
“The proportion of borrowers fixing their home loan in March 2015 was lowest level in almost three years, at 10.52 percent. We’re expecting to see this figure increase as we get closer to the end of the year.
“With rising rates on the horizon, there’s no need to panic. Borrowers have time now to prepare by adding as much as they can to their mortgage repayments. It’s also worth considering refinancing your home loan to another lender or asking your existing lender for a cheaper deal. These strategies can minimise the impact of higher costs down the track.”
Disclaimer: the comments, forecasts, projections and other predictive statements by the panel of experts are assumptions based on currently available information. These forecasts are based on industry trends and economic factors that involve risks, variables and uncertainties. No guarantee is presented or implied as to the accuracy of these forecasts and consumers are advised to read product disclosure statements and understand if financial products are right for them before signing up.
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The information in this release is accurate as of the date published, but rates, fees and other product features may have changed. Please see updated product information on finder.com.au's review pages for the current correct values.
finder.com.au is Australia's most visited comparison website and has helped over 4.8 million Australians find better credit cards, home loans, life insurance, shopping deals and more since 2006. finder.com.au compares 250 credit and debit cards from 31 providers, over 300 home loan products, and information from 13 life insurance providers as well as online shopping promo codes, mobile phone plans, travel insurance and more. One Australian every five minutes is using finder.com.au to find better (Source: Google Analytics).