Several commentators have called an end to the current cycle of low interest rates, and suggested that they will start to move higher in 2017.

So if you have a mortgage, does this mean that you should start to lock in your rate with a fixed interest loan, to protect yourself against any rate hikes?

During the week, mortgage lender RAMS said it would increase the rate on its two and three-year fixed rates for owner occupiers by 0.25 percent, to 4.14 and 4.24 percent.

This follows similar moves from other small lenders FirstMac and ME Bank.

The move prompted Mortgage Choice chief John Flavell to offer this advice: “If people have been waiting for the bottom of the interest rate cycle, it may well already have passed.”

The next question is whether the big banks, such as RAMS parent company Westpac, will also start to hike rates.

If that happens, then we can be pretty sure there’s a major move on in the market.

In deciding on whether to fix, however, it is worth bearing in mind that variable rates are generally a little lower than fixed rates.

So if you think rates are going to stay flat for a while, and then move up slowly, then this will be a dilemma.

Maybe you want to hang on for a while to see how fast the market moves, before you lock yourself in?

Another option could be to fix part of the mortgage, while keeping the rest on variable.

Then at least you are playing it both ways, and if the market really starts to move fast you can then fix the remaining portion.

One thing is clear though, is that the financial press this week has been full of headlines declaring the end of the current cycle.

Driving all this has been the global spike in Bond yields since the election of Donald Trump in the US.

There is an expectation that a Trump Presidency will see lower corporate tax in the US and an infrastructure spending spree which is likely to push global rates higher.

The Reserve Bank of Australia has progressively cut official rates over the last few years down to a record low 1.5 percent, and while mortgage rates do not march directly in step with the RBA, they definitely set the tone.

Notes from the most recent RBA meeting shows the bank is in two minds on rates, and that – domestically at least – there is an argument to cut them again.

But if the momentum on global markets which is being driven in the US continues to build, then perhaps our central bank will have its choice made for it.


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