HLIR018 Interest Rates 101 (700 words)

Description

This article provides a step by step explanation on what affects interest rates in Australia and how this flows on to mortgagees. A great article to utilise after an interest rate rise.

Introduction

While we understand banks charge interest on their home loans, exactly what determines the rate? Should we be worried that interest rates will spike higher in the years ahead?

For most people, it's all a bit of a puzzle.

Traditionally, the Reserve Bank of Australia (RBA) is tasked with the responsibility of setting interest rates. It does this at monthly board meetings by determining the so-called cash rate, or the price the big retail banks pay to borrow money in the overnight cash markets.

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