Rate hikes signal what’s to come for home loans

Following changes to its popular three-year fixed rate, the Commonwealth Bank is showing that its movements indicate the future variability of rate hikes ahead of the final meeting of the Reserve Bank of Australia (RBA) tomorrow, according to analysis from RateCity.

The Commonwealth Bank (CBA) lifted the rate by 0.20 percentage points to 4.24 per cent last week, a fortnight after Westpac also made changes to its fixed rates.

According to RateCity data insights director, Peter Arnold, CBA in its capacity as the country's biggest lender, has held strong influence on the movements of the banks, and what can be expected for fixed interest in 2017.

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"Previously, banks were betting on lower rates in the future but we're seeing those expectations change by the day," he said.

"Fixed rates are based on market expectations of future rates and are the best indicator that we've got a variable rate hike on the way."

Arnold said that the decision of many to fix home loans had gained recent popularity and that the financial wellness outlook on a fixed loan was positive for the next five years.

"Interest in fixing [has] risen by nearly 30 per cent in November... as home owners lock in now before rates rise further," he said.

"If you're someone who prefers the certainty of knowing your repayments... you can lock in a rate as low as 3.8 per cent until Christmas 2021."

The Reserve Bank of Australia (RBA) would meet tomorrow to set the target cash rate for the final month of the year.

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