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October was a good month for investors: the Reserve Bank of Australia kept interest rates steady at 2%, continuing the bank’s trend of keeping the rates at this low level, however at a more local level all of the four big banks in Australia (ANZ, Commonwealth, NAB, and Westpac) have seen fit to go against the trend and raise the interest rates on home loans they offer to customers.

Given that this raise in rates directly goes against the outlook and continuing trend put forth by the RBA this move has raised a few eyebrows and left many scratching their heads trying to make sense of it. With all of this confusion surrounding changes made to the interest rates we have decided to clear the air with potential investors and explain why the rates system works the way it does.

The Reserve Bank of Australia dictates the official interest rate based on a number of economic issues both at home and internationally. Issues that affect the interest rate percentage include: growth/decline of the economy, the price of commodities, consumer confidence, the strength of the Australian dollar, and global financial conditions.


While the banks in Australia stay close to the RBA’s decisions regarding interest rate movements this does not explain their recent decision to raise interest rates. Explaining the decision the major Australian banks claimed that the rise in interest rates was a consequence of new banking regulations implemented by the federal government requiring banks to hold additional financial capital to serve as a “buffer” in case of future financial crises, unfortunately for investors and home buyers this means that they pay more on their monthly mortgage.

While is does sound dire the amount that the banks have increased rates remains very low. On top of the already record lows set by the RBA the extra amount that the investor pays per month does not increase by very much in comparison to what they are already paying. When choosing a home loan it pays to be aware of federal banking regulation decisions, RBA interest rate movements, and which bank offers the best loan repayment rate.

If you would like to speak to real estate professionals experienced in home loan solutions, contact Hicks Real Estate today for confidential and friendly advice on 07 33556845.

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Hicks Real Estate is a Brisbane based, full-service real estate agency supporting buyers and sell as well as renters and property investors. With almost 20 years experience in the local market, we are the real estate experts you can rely upon.