the adviser logo

Flavell warns of further rate hikes in 2017

by James Mitchell4 minute read

Mortgage Choice chief executive officer John Flavell believes Australia’s lenders will continue to lift interest rates throughout 2017 against a backdrop of increasing funding costs and possible increases in the local cash rate.

Mr Flavell’s comments come after the US central bank announced it would increase its benchmark short-term interest rate.

“The US central bank said the recent progress of the economy gave them the impetus they needed to increase the federal funds rate by 25 basis points to 0.75 per cent, he said. 

“The bank also indicated that the federal funds rate could rise by a further 75 basis points throughout 2017 – through three separate rate increases.


“This announcement, combined with the fact that many of Australia’s lenders have started to raise rates across their suite of home loan products, would suggest a cash rate increase by the Reserve Bank of Australia is now more of a possibility than not in 2017.

The Reserve Bank of Australia had previously stated that the easing bias has passed and the latest changes by the US Central Bank would support this, according to Mr Flavell.

“Of course, even if rates rise, it is important for borrowers (and potential borrowers) to keep in mind that interest rates will still be very low by historical standards.

The Mortgage Choice boss said any rate rises are likely to be small, which will help keep the cost of borrowing incredibly affordable.

As a result, I would expect certain parts of the property market to remain strong, he said. 

“Property prices are driven by four key factors: supply versus demand; the cost of credit; access to credit; and overall employment levels.

“Across the country, property demand remains relatively strong. In Sydney and Melbourne specifically, the level of stock coming onto the market has fallen over the last 12 months, with listings in Sydney and Melbourne down 9.4 per cent and 2.9 per cent respectively.

“When you combine falling stock levels with clearance rates above 75 per cent, it is clear that demand remains strong in both of the capital cities.

“Furthermore, despite the latest spate of interest rate increases, home loan rates remain historically low, keeping the cost of credit at affordable levels.

While many of Australia’s lenders have tightened their lending policy over the last 12 months, Mr Flavell says they remain hungry for business in both the owner-occupied and investor space – a trend that will continue as we head into 2017.

“Furthermore, unemployment remains low by long-term standards. Latest data from the Australian Bureau of Statistic shows the unemployment rate is currently sitting at 5.7 per cent — which is a positive sign for the economy as a whole.

“With all of this in mind, I wouldn’t be surprised to see continued growth in property prices across some markets — specifically Sydney and Melbourne. While the level of growth may not be as strong as we have seen in recent years, overall, we can expect to see growth continuing.”

[Related: Rate hikes are a 'money grab', says CEO]

Flavell warns of further rate hikes in 2017
TheAdviser logo

James Mitchell

James Mitchell


James Mitchell has over eight years’ experience as a financial reporter and is the editor of Wealth and Wellness at Momentum Media.


Mark hewitt

AFG GM to join MFAA board

Mark Hewitt, general manager, industry and partnership development at Australian Finance Group (AFG) will commence as...

Possibl co founders

Early commission payment loans open to full broker market

Following its launch of an early commission payment product to brokers using the effi platform, cash-flow solutions...

David Keeling

Grow expands structured finance, appoints senior partner

According to Grow Finance (Grow), David Keeling’s appointment, which commenced on 11 April, is part of a broader...

Read the latest issue of The Adviser magazine!
The Adviser is the number one magazine for Australia's finance and mortgage brokers. The publications delivers news, analysis, business intelligence, sales and marketing strategies, research and key target reports to an audience of professional mortgage and finance brokers
Read more