Should you fix your rates?
Tuesday, February 5, 2008/
The chief economist of one of Australia’s biggest banks has warned SMEs against fixing their loan interest rates in response to today’s rate increase.
The Reserve Bank of Australia announced a 0.25% increase in the official cash interest rate to 7% after the RBA board met early this afternoon.
Debate is now raging over whether the RBA will be forced to lift rates again in 2008, with many economists predicting another rate rise by the middle of this year.
NAB chief economist Alan Oster says there will be another rate rise, but SMEs should not be fixing their loan rates.
Oster says that today’s rise and the next one have already been factored into lending rates by banks.
If business fixes rates now they could be miss out on a fall in rates Oster believes will take place in Australia next year.
He warns that business owners often rush off to fix their rates at the very time they should not. “I am talking as an economist, not a financial adviser,” Oster told a Franchise Council of Australia breakfast meeting this morning.