For immediate release
Information verified correct on February 27th, 2017
Reserve Bank cuts cash rate, but party could be over for borrowers
- 16 of 34 experts expected cash rate to drop today: finder.com.au Reserve Bank Survey
- Most experts tipping cash rate to start rising next year
- Borrowers with average $300,000 mortgage will need to factor in extra $341 per month
May 5, 2015, SYDNEY, AUSTRALIA – Despite the Reserve Bank cutting the cash rate today, one of Australia's biggest comparison websites finder.com.au is warning borrowers that the party could soon be over and is urging Australians to start preparing now for imminent interest rate hikes.
Loans.com.au was the first to announce it will be passing on the full rate cut to its variable rate home loans following the Reserve Bank’s decision today to drop the cash rate by 0.25 percentage points to a record low of 2.00 percent. Its Essentials Home Loan has dropped to 3.98 percent – the first time finder.com.au has seen ongoing variable home loan rates fall below 4 percent. All other lenders are yet to make an announcement about passing on today’s cash rate cut.
More than half (53 percent) of the 34 leading experts and economists in the finder.com.au Reserve Bank Survey, which is the largest survey of its kind in Australia, were expecting the cash rate to hold today (May 5, 2015) including National Australia Bank. The remaining 47 percent of experts were betting on a cut, including Commonwealth Bank and Westpac.
While just six of the experts surveyed are expecting another cash rate cut this year after today’s cut, the majority of experts (23 experts or 68 percent) are forecasting interest rates to start rising from as early as February next year.
Michelle Hutchison, Money Expert at finder.com.au, said borrowers should start preparing now for interest rate hikes.
"While most borrowers who have a variable rate home loan will be rejoicing in saving about $47 per month for an average $300,000 home loan from today's rate cut announcement, it looks like the party is over for more rate drops.
"Interest rate hikes are right around the corner. If you're not preparing now for higher costs, you could end up in financial trouble from next year.
"Higher interest rates will hurt new borrowers the most, especially those who bought their first home in the past few years and have never experienced a rate rise. Also those who overstretched themselves and are already struggling to meet repayments.
"The Survey shows the cash rate is expected to rise to 4 percent, which means variable home loan interest rates will hit an average peak of 7.10 percent. For an average $300,000 home loan, that's an extra $341 in repayments per month.
"There would be a lot of borrowers who are not factoring in this higher cost and will need to start preparing now to ensure they won't be under unnecessary pressure from next year by comparing home loans, asking their lender for a discount, switching to a cheaper deal and making fortnightly or weekly repayments rather than monthly."
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 one of Australia’s biggest comparison websites 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 or creditcardfinder.com.au to find better (Source: Google Analytics).