What determines an interest rate change?

Whilst everyone with a mortgage keeps an eye on the RBA Cash Rate announcement each month to determine what will happen with their current interest rate, there are multiple other factors that come in to play when banks determine your interest rate.

A very important factor and one you should keep your eye on is the Bank Bill Swap Rate (BBSW).

In simple terms, the BBSW is the short-term interest rate many lenders pay to borrow the funds that they lend to their customers. There are times when a lender increases their interest rates without the RBA increasing the cash rate, and the BBSW could be the reason.

As you can see in the graph, whilst the RBA Cash Rate has been on hold for a record 24 consecutive months, the BBSW has been increasing, which in turn has increased the lender’s costs to borrow funds. This increase in the banks’ overheads will often get passed onto their customers by increasing the interest rate.

how is your interest rate determined?

Again, there are many factors why lenders increase and decrease your interest rate but the BBSW is a very important rate to watch.

If you would like to this discuss this information further, or would like advice on fixed vs variable interest loans,  please contact one of our highly skilled mortgage brokers from the Allan Hall Finance team.

Allan Hall named finalist in numerous firm-wide categories, including the Australian Accounting Awards 2019

Allan Hall Business Advisors continues to impress with individual, network and firm-wide awards and accolades, with our latest nomination as finalists in 6 categories of the Australian Accounting Awards 2019, Women in Finance Awards and HR Manager of the Year. For further details and a full list of our recent awards, click below.

Global alliance focussed on business excellence

Allan Hall is the Sydney member of Alliott Group, an award winning, growing, global alliance of 160+ accounting, law and consulting firms in 60+ countries.