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Historical interest rates and interest prediction for 2011

Marty McDonald - Saturday, February 12, 2011

Thought I would have a look back over what has happend to interest rates over the last few years and also have a look at how the margin between the RBA overnight cash rate and the banks lending rates have changed in that time. I have also included a table that shows all RBA decisons since 1990. I have also thrown my two cents in for a 2011 interest rate prediction.

Current rates as at February 2011

RBA overnight cash rate = 4.75% pa
Average standard variable rate = 7.80% pa
Average rate borrowers actually pay = 7.10% pa
Margin between RBA cash rate and what borrowers pay = 2.35% pa

My interest rate predictions for 2011

I think the RBA will hike interest rates this year by 0.5% pa but not until the end of the year. My prediction is a 0.25% pa increase in October and another 0.25% pa in November. That would bring the rate borrowers pay up to around 7.60% pa on average. I don't think lenders will hike above the RBA moves this year.

What happened to interest rates during the GFC

The RBA cash rate peaked in the last cycle in March 2008 at a rate of 7.25% pa before the onset of the GFC. At that time the average standard variable rate was around 9.60% pa but most borrowers were paying around 8.95% pa (I remember paying 8.88% pa myself and CBA promoting that rate as it is a lucky number for Chinese borrowers apparantly!).

The overnight cash rate set by the RBA was reduced quickly from late 2008 onwards and bottomed at 3% pa in April 2009. At that time variable home loan rates also bottomed, with borrowers paying around 5% pa.

Since the GFC the margin between the RBA cash rate and the lenders rates has increased.

The margin between the RBA overnight cash rate and the actual rate paid by most home loan borrowers was around 1.65% pa pre the GFC. It is now more like 2.35% pa so the change has been around 0.7% pa overall. Small business owners with loans saw a much higher change in the margin that lenders charged.

Historical RBA cash rate decisions (table courtesy of the RBA web site)

 

Cash Rate Target
Effective Date Change in cash rate
Percentage points
New cash rate target
Per cent
3 Nov 2010 +0.25 4.75
5 May 2010 +0.25 4.50
7 Apr 2010 +0.25 4.25
3 Mar 2010 +0.25 4.00
2 Dec 2009 +0.25 3.75
4 Nov 2009 +0.25 3.50
7 Oct 2009 +0.25 3.25
8 Apr 2009 -0.25 3.00
4 Feb 2009 -1.00 3.25
3 Dec 2008 -1.00 4.25
5 Nov 2008 -0.75 5.25
8 Oct 2008 -1.00 6.00
3 Sep 2008 -0.25 7.00
5 Mar 2008 +0.25 7.25
6 Feb 2008 +0.25 7.00
7 Nov 2007 +0.25 6.75
8 Aug 2007 +0.25 6.50
8 Nov 2006 +0.25 6.25
2 Aug 2006 +0.25 6.00
3 May 2006 +0.25 5.75
2 Mar 2005 +0.25 5.50
3 Dec 2003 +0.25 5.25
5 Nov 2003 +0.25 5.00
5 June 2002 +0.25 4.75
8 May 2002 +0.25 4.50
5 Dec 2001 -0.25 4.25
3 Oct 2001 -0.25 4.50
5 Sep 2001 -0.25 4.75
4 Apr 2001 -0.50 5.00
7 Mar 2001 -0.25 5.50
7 Feb 2001 -0.50 5.75
2 Aug 2000 +0.25 6.25
3 May 2000 +0.25 6.00
5 Apr 2000 +0.25 5.75
2 Feb 2000 +0.50 5.50
3 Nov 1999 +0.25 5.00
2 Dec 1998 -0.25 4.75
30 Jul 1997 -0.50 5.00
23 May 1997 -0.50 5.50
11 Dec 1996 -0.50 6.00
6 Nov 1996 -0.50 6.50
31 Jul 1996 -0.50 7.00
14 Dec 1994 +1.00 7.50
24 Oct 1994 +1.00 6.50
17 Aug 1994 +0.75 5.50
30 Jul 1993 -0.50 4.75
23 Mar 1993 -0.50 5.25
8 Jul 1992 -0.75 5.75
6 May 1992 -1.00 6.50
8 Jan 1992 -1.00 7.50
6 Nov 1991 -1.00 8.50
3 Sep 1991 -1.00 9.50
16 May 1991 -1.00 10.50
4 Apr 1991 -0.50 11.50
18 Dec 1990 -1.00 12.00
15 Oct 1990 -1.00 13.00
2 Aug 1990 -1.00 14.00
4 Apr 1990 -1.00 to -1.50 15.00 to 15.50
15 Feb 1990 -0.50 16.50 to 17.00
23 Jan 1990 -0.50 to -1.00 17.00 to 17.50


Want to see where current mortgage rates are sitting now?

Check out our current mortgage rates page for up to date interest rates.




Regards,

Marty McDonald

About the Author: Marty McDonald is principal of mortgage broker “Mortgage Experts”. Marty specialises in assisting active property investors with loan structuring advice and implementation as well as helping credit worthy borrowers with slightly outside the box income and employment situations. Find Marty on and LinkedIn.

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