Australian interest rates were at a historical low for many months. This was part of a worldwide phenomenon as rates were progressively "de risked" and more recently to pump up the economy when Covid hit. Australian banks still borrow a large percentage (about 30%) of the funds they lend out from overseas sources. This makes our economy and interest rates very susceptible to the impact of events overseas.
In 2022 we have seen a number of shocks such as the Russo - Ukraine war, the collapse of the Chinese real estate market, and possibly their banking system, supply chain shortages, increased oil prices, and our own real estate prices rising significantly. The net impact has been twofold a) significantly increased financial risk & b) inflation rising to 1990s levels. The RBA has put the brakes on.
The long-term average variable residential home loan rate in Australia has been 6.03% per annum.
Business loan rates for SMEs with residential security have traditionally been 1% to 3% above the home loan rate. Loans that aren't secured by real estate are perceived to carry more risk and rates are higher based on the lenders' assessment of the risk. "Short term "unsecured" business loans are high risk and rates are higher.
It's likely that there are more rate rises to come, the economy will slow dramatically, and things are not going to look up in the short term.
Comparing lending products purely on the basis of interest rate can be very misleading. The tables below show the indicative pricing, and credit guidelines for various categories of business loans. Both rates and guidelines for business loans vary immensely depending on a lenders appetite for risk, speed to settle and security.
Residential Rates - Indicative - Non business purposes
The interest rates shown are indicative only from a composite group of lenders for a loan of $500,000 with a Loan to Valuation Ratio (LVR) of 80% over a nominal term of 30 years and are subject to lenders fees, terms and conditions. Loans are from a number of lenders. Rates, fees and guidelines are subject to frequent change without notice and should always be confirmed before application.
Commercial Property - Purchase, refinance or business purposes