When the interest rate on your home loan fluctuates, it can feel as though you don’t have control of your debt. Despite being frustrating, interest rate changes are a part of every loan’s lifespan and warrant your consideration.

The interest rate that banks charge on their home loans are influenced by the Reserve Bank of Australia’s (RBA) cash rate. The cash rate is reviewed by the RBA on a monthly basis in order to safeguard Australia’s economic stability. The cash rate is the rate charged on loans made between the RBA and your lender. This, in turn, has a very strong impact on the interest rates your lender charges you.

When the cash rate is changed by the RBA, lenders decide whether or not to mirror the new rate in the interest they charge their mortgagees. This is entirely up to the lender in question and depends on the market and how the lender is performing at the time of the cash rate change.

Some lenders choose to shift their interest rate changes higher than the RBA’s cash rate change and, in these instances, other lenders may be offering lower interest rates than the one you currently have.

Keeping track of how your lender manages cash rate changes and where that leaves you as the person paying the interest rate can be time consuming, and is made more difficult by fees, charges and the flexibility offered by different loan products, which all need to be weighed alongside the interest rate.

A simple way to regain control of your interest rate is to fix the rate for a period, if you believe rates are not likely to fall further. Fixed rates offer less flexibility, but more certainty.

If you require any further information, contact me on 0402 203 303 or email me at [email protected].