What's the future for home loan rates in 2017?
Inflation rates have remained stubbornly low, implying the RBA may cut rates further this year. In the past, the official cash rate (OCR) and mortgage rates have risen and fallen in parallel but if there are further OCR cuts will this be passed on to customers by the banks?
In the first meeting of 2017 the reserve bank has opted to leave interest rates on hold at 1.50%. With rising political tensions around the world, it’s not a surprise that the RBA is proceeding into 2017 with caution.
Reserve Bank Governor Philip Low stated that “Above-trend growth is expected in a number of advanced economies, although uncertainties remain," and mentioned both China and the US.
We would predict that regardless of what the RBA does, banks are unlikely to pass on full cuts for some time. We’ve already seen a rise in fixed interest rates and after a long period with record low rates banks will be eager to pad their profit margins in the face of tightening restrictions and global uncertainty. Interest rates may eventually rise at a slow rate which can already be seen by more conservative rate discounts offered by major lenders in 2017.