Mortgages in Australia
Current Mortgage RatesThe Cash Rate Target (base rate) set by the Reserve Bank of Australia is currently 2.25% having been last reduced by 25 basis points (0.25%) on 4 February 2015.
A brief history
As shown in the chart below, Australian rates rose steadily from 2002 until mid 2008 as Australia's economy boomed and containing inflation was the Reserve Bank's main priority.
When the GFC (Global Financial Crisis) hit in late 2008, policy was reversed and rates came down very quickly to a low of 3% in April 2009. After that, unlike many other countries, Australia's economy remained strong, driving the inflation rate up and as a result interest rates were increased gradually to 4.75% where they sat for most of 2011. Many other countries' economies struggled through this period and consequently their interest rates were kept very low. The UK, for example, has had a base rate of 0.5% since March 2009.
By the end of 2011, it became apparent that Australian economic growth had slowed and inflation was no longer a problem - interest rates began to come down again. Between Nov 2011 and August 2013 the rate fell from 4.75% to 2.50%, where it sat for almost 18 months.
The Cash Rate Target in 2015
The latest position is that the Australian economy has slowed and unemployment is rising, primarily because of lower global demand for resources. The RBA is looking to stimulate other (non-mining) areas of the Australian economy by dropping rates again, while also trying NOT to over-stimulate the housing sector. The first move was to drop the Cash Rate Target to 2.25%. Many analysts believe there are more rate cuts to come in 2015.
Source of data: Reserve Bank of Australia
Home Loan Rates
It should be noted that retail mortgage rates are always quite a lot higher than the RBA Cash Rate. Below are some rates offered by Australian lenders in February 2015.
- Standard Variable rate = 4.23% - 5.89%
- 3 year fixed rate = 4.64% - 6.14%
- Typical setup fees = $600