Time is running out fast for property owners to fix their variable mortgage rates before the RBA increases the cash rate next week by 0.25% and the big four put another 0.25% on top of that.
I should mention at the outset that I have fixed my rates this week.
Variable rates are in the high 6% and the 3 year fixed rate is less than 7.5%. For many there is only 0.5% difference between fixed and variable. So if variable rates do go up next week by half a percent, fixed and variable rates will virtually be equal. Of course, the banks may well move fixed rates up as well, giving borrowers an extra incentive to move quickly i.e. before Melbourne Cup day, or three business days from now.
You have been warned. Jobs growth is still strong and inflation figures out yesterday showed that annual inflation is still running at 2.8% pa or close to the RBA’s limit. Furthermore, the RBA knows that it is carrying the entire burden of reigning in inflation because the State and Federal governments are in such political paralysis that no tax rises (e.g. carbon tax or minerals tax) will get through any time soon. Finally, all bank CEOs have been saying how they need to raise rates.
On balance I think rates will rise 0.5% by mid November with the RBA leading the way with a 0.25% cash rate rise on Melbourne Cup day. If I am right variable rates will be about the same as my fixed rates. If I am wrong then the RBA probably will not be able to raise rates until February, which is too long to wait. I think the RBA will move on Tuesday and the commercial banks soon after.
With Christmas around the corner and no RBA meeting in January, odds are we will get a rate rise. Happy Melbourne Cup, hope you pick a winner!
Please note, the above comments are my personal views so please check with your financial advisor before moving on my suggestions.
