Will interest rates rise over the next few years?
by Peter Switzer
I know you are always asked about fixing interest rates but there seems to be more experts suggesting that the Reserve Bank will cut interest rates and so I am wondering if I should wait. I have read that interest rates will head up over the next few years. Do you agree?
I think the Reserve Bank will cut interest rates in May and we could easily see another later in the year. This should help put downward pressure on fixed interest rates but they don’t fall like variable rates. That said, if the economy is weakening, and I think it is, then we could see some lower fixed rates in the future.
One thing I would advise is that you look at the comparison rate of interest as this will add in any fees that come with the home loan. I have noticed some loans priced at 6.15 per cent but when the fees are added in they go up to 6.7 per cent.
Go to websites such as www.ratecity.com.au and check out the differences between the headline and the comparison rate to know what you’re getting into.
On what will happen to rates in the future, I do think rates will rise in 2013 and beyond and so this year could be the year to fix your rate but this is only my best guess – it’s not advice. Provided the world can get growing faster in 2013 and there are no calamitous financial market developments, which I think can be avoided, then stock prices should rise, economies will grow faster, unemployment will fall and inflation will tick up causing interest rates to rise.
One last thing, with most fixed rate home loans you can’t pay off the loan quickly with lump sum deposits, (though there are some rare products that will let you do it) and to close out the loan comes with a penalty cost, so make sure you know what your potential cost might be.
Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.
Published on: Wednesday, April 18, 2012