Here’s some good news for mortgage holders worried about more interest rate rises in the near future: the banks are all saying that they won’t raise interest rates until after the federal election. Of course, we don’t yet know how soon the federal election could be – late next month is a common tip at the moment – but it could even be later than that, and the later it is, the more reprieve we home loan customers have on increased repayments.
Apparently the main reason for this is that banks are admitting to feeling political pressure not to raise interest rates in the lead up to an election, for the fear that politicians will use it as fuel to attack banks – especially as they look like having huge profits again with the combined profits of the main four banks looking to be over $20 billion (and of course it does beg the question, why do they need more interest payments from us when their profits are so huge …). Last federal election, back in 2007, the banks held off for another two months after Kevin Rudd was elected before raising interest rates. If they follow that method again it’ll likely be an interest rate gift just in time for Christmas, which naturally won’t be very popular.
The only reasons the banks might not be able to hold off on an interest rate rise are twofold – first off, if the government doesn’t call a federal election for this year. Technically, it could be early next year, although it is looking like it would be more advantageous for the current government to get an election over and done with sooner, but it is still a possibility. The second reason is that banks are saying their funding costs are rapidly increasing and they need to recoup some of these costs through interest rate rises.