Uh oh, the home loan rate hikes have started …

One bank raised variable home loan interest rates yesterday and more are expected to follow. Just a few weeks ago futures markets were pricing in further rate cuts but now, all of a sudden, expectations have shifted 180 degrees.

The Australian share market is rising strongly, on the back of strong commodity price rises and new records being achieved on the New York Stock Exchange. Many investors initially fled the market after the election of Donald Trump as the new US President but those jitters have eased and investors are now apparently more enthusiastic about the US economy than they have been in years.

That all means that home loan interest rates are now more likely to rise in the near future than fall. While fixed rate home loan rates are tipped to be the first big movers up, one bank has broken ranks already and raised its all-important standard variable home loan rate. More are sure to follow in the very near future.

Which bank is raising home loan rates?

ME has confirmed a range of rate rises across its range of owner-occupier and investor home loans. ME, unlike most other lenders in Australia, has wide range of home loan rates based on loan to valuation ratios and loan sizes. ME offers borrowers with large loans and low LVRs lower rates than other borrowers.

ME’s Flexible Member Package home loans as well as some ME fixed rate home loan rates have all been jacked up by between 0.05 per cent and 0.15 per cent.

The ME rate rises came into effect yesterday, Wednesday 23 November 2016, so borrowers are already paying more on their home loans.

The variable rate being charged now on the ME Flexible Home Loan with Member Package for owner occupiers with an LVR of 80 per cent or less and a loan amount of $400k – $700k has gone up 0.05 per cent to 3.84 per cent.

The variable rate being charged by the ME Flexible Member Package (LVR 80% or Less, Loan Amount $700K or more) has gone up 0.10 per cent to 3.79 per cent.

ME’s three year fixed rate for investors with an LVR of 80 per cent or less has moved up to 3.99 per cent.

Other lenders are set to raise rates

ABC News reported this week that forward pricing on interest rates by traders on the Sydney Futures Exchange has turned completely around. A few months ago, traders expected further rate cuts from the Reserve Bank of Australia and retail mortgage lenders.

Now the market expects the next move on interest rates to be up. Many finance experts expect fixed rates to climb first because fixed rates are often based on long term bond yields, which are rising.

A few banks and lenders are expected to raise variable rates, or end their variable rate discount deals in the next few weeks, but wide scale rate rises will probably occur only after the RBA raises rates. The RBA board next meets to decide on interest rate settings in February 2017.

What are the lowest home loan rates now available in Australia?

InfoChoice lists home loans from all of Australia’s major banks, credit unions and non-bank lenders. The lowest standard variable home loan rate now available in Australia is 3.36 per cent (comparison rate 3.40 per cent) from Homestar’s Basic Refinance loan.

The lowest one year fixed home loan rate now available in Australia is 3.59 per cent (comparison rate 4.37 per cent) from QT Mutual Bank.

The lowest three year fixed home loan rate now available in Australia is 3.59 per cent (comparison rate 4.32 per cent) from ING DIRECT.

You can research and compare variable rate home loans here.

Our fixed rate home loan comparison tables are here.


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