07 Jul 2021

How Quickly Do Interest Rates Change?

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The Reserve Board of Australia meets every four weeks during the year to decide the interest rate. Theoretically speaking, interest rates could change every four weeks. However, this often does not occur. Sometimes interest rates don’t change for months or years. 


What Affects Interest Rate Changes?

  1. The most significant factor that affects interest rates is the RBA. They control the official cash rate, which impacts how lenders set their home loan rates. Lower cash rates mean lower interest rates. However, just because the RBA changes the cash rate, it doesn’t mean your interest rate will follow suit or change the same way. 
  2. Banks want to make sure they have a high return on equity, but they also want to keep their customers happy. Return on equity is the way a bank uses its shareholders’ money to gain a profit. Higher interest rates mean more profit and happy shareholders. However, they also mean unhappy customers. It is a balancing act for banks. 
  3. Banks also need to cover their costs. In general, banks can make more money if they lend money out at a higher rate than they borrow it. The money they lend out comes from wholesale debt, deposits, the bank bill swap rate, and the residential mortgage backed securities rate. If the cost to borrow money from these sources increases, your interest rates increase so banks can cover their costs. 


Many factors go into how often interest rates change. Mortgage House can help you secure a home loan with the best rates available, whatever the current home loan interest rate is. 


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