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Understanding interest rate rises

Understanding interest rate rises

We watch with anticipation as interest rates rise and fall. The impact of which affects everyone who has a home loan, term deposit or other deposit accounts. Let’s have a brief look at how it affects each finance platform.

Interest rate rises are part of the economic cycle and are expected to occur often. The Reserve Bank of Australia has the authority to move the cash rate, which is the benchmark that lenders use to borrow against each other, and it is aimed to control inflation. Lenders also use the cash rate to determine their interest rate rises.

Variable mortgages

For variable mortgages, interest rate rises do not usually increase by big jumps, they most commonly rise by 0.25 percent.

Fixed mortgages

Fixed mortgages and fixed investments such as term deposits can be much more irregular and experience heavier rate rises with larger jumps and also less frequent due to the size of the jump.

Deposit accounts

Other deposit accounts usually follow the cash rate much closer and experience rate rises just as often.

Here are some of the lowest variable rate mortgages in the market to help you land your new home.

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