Australian households have taken out a record number of fixed rate loans in November in anticipation of further rate hikes in the year ahead, according to recent data from AFG.
More than one in four borrowers (27.3%) opted for fixed rate loans - the highest level AFG has recorded in the three years it has been running the survey.
Mark Hewitt, general manager of sales and operations at AFG, said anxiety over future rate hikes and the continued fallout from the US credit crisis has prompted borrowers to seek the security of fixed mortgages over the flexibility of variable loans.
The average mortgage size has also hit an all-time high of $333,000 amid rising property prices across the country. The number of property investors continued to grow, now accounting to more than a third (32.5%) of all home loans sold.
For borrowers who are thinking of fixing their mortgages, it may be too late, according to experts. "Future interest rate increases have already been factored into fixed rates, thereby making them relatively expensive," said Sebastian Farini, general manager, Austral Credit Union.
Harley Dale, chief economist, Housing Industry Assocation, agreed: "In a rising interest rate environment it's worth considering fixing part of a mortgage and this option should certainly be looked at. However, expectations of future increases in mortgage rates may already be priced in. A fixed rate isn't for everybody, as fixed rate loans have less flexibility and fewer features than variable loans. Fixed rate loans are also harder to pay out early as there are generally penalties incurred."
It can be confusing to know whether to get a variable rate or fixed rate mortgage, and what features are important. That's why it's important to not only check the right rates, but make sure that you're getting the right features in your home loan. Get help choosing the right home loan