Home News Is it a mistake to fix your rates now?

Is it a mistake to fix your rates now?

Font size :
Nila Sweeney
It’s currently possible to fix your mortgage interest rates for up to half a percent less than current variable rates... so is this the right time to lock it in?
Fixed rate loans have dropped to their most competitive levels in months, prompting many mortgage holders to lock in their loans.
Commonwealth Bank has dropped its three-year rate to 6.59% while NAB’s three-year rate is down to 6.69%, and non-bank lenders RAMS (backed by Westpac) and ING Direct are down to 6.79% and 6.69% respectively. These are the lowest three-year fixed rates have been all year, down from an average of around 7.5% in February.
“I can rarely recall a more uncertain or complex time for Australian households, and the banks’ fixed rate cut [last week] posed a whole new set of questions for battlers,” says Mark Bouris, founder of Wizard Home Loans and chairman and co-founder of Yellow Brick Road Group.
And now, borrowers want to know: do the deals currently on offer really represent good value, or are lenders simply slashing their fixed rate products to lock borrowers in at a higher rate, because they expect the cash rate to plummet?
Sentiment has turned swiftly in the last two weeks, as it was only at the beginning of August that many economists still predicted at least one or two rate hikes by year’s end.
Last week Australia's unemployment rate increased to 5.1%, when it was expected to remain stable at 4.9%. This, combined with lagging retail sales, global economic turmoil and low consumer confidence, has taken the pressure off the Reserve Bank to lift rates in the near term.
In fact, it actually puts pressure on the central bank to slash rates, which is precisely what many economists are now predicting. Credit Suisse data shows that there is presently a three-in-four chance of a 50-basis point cut when the RBA board meets next meets on September 6.
"It's the first sign the unemployment rate is beginning to drift up [and] it's consistent with other indicators of the labour market – job ads and hiring intentions – that things are actually getting worse,” says Macquarie senior economist, Brian Redican.
"It certainly removes any rationale to tighten rates at this stage. If it continues on for a couple more months, rate cuts will be on the agenda.”
On a $300,000 mortgage, a half a per cent rate cut translates to savings of around $97 a month, or $1,167 per year – although, whether the banks will pass this cut on to consumers remains to be seen. If interest rates fall 1% as suggested by Westpac chief economist Dr. Bill Evans last month, borrowers could save almost $2,500 per year on a $300,000 loan.
With all of this information at hand, does it make sense to fix your rates at present?
“In today’s volatile financial landscape, consumers are looking for stability, which is why homeowners might be attracted to move into a fixed rate. In capricious times, people crave calm,” Bouris says.
“So, to fix or not to fix? It you take a fixed-rate loan today you might shave 40 to 60 basis points off your annual repayments. But the bond markets are forecasting up to five or six rate cuts over the next year, so it might be prudent to wait a few months to see what the RBA actually decides to do. If the unemployment rate really does start rising rapidly, the RBA could cut rates by a full one to two percentage points.”

Whether you are looking to buy your first home, move home, refinance, or invest in property, a mortgage broker can help. Access loans from all the major lenders, get help with paperwork – plus there is no charge for this service. Get help from a local mortgage broker

Mortgage News and Articles

To break monopoly, many smaller lenders could become banks To break monopoly, many smaller lenders could become banks

The proposed change could break the Big Four’s monopoly over the mortgage market and help families get cheaper home loan rates Read more

Borrowing against the home: A strategy to pay for aged care Borrowing against the home: A strategy to pay for aged care Such debts can generally be divided into long-term and short-term loans ... Read more

NAB slashes growth forecasts for houses, units NAB slashes growth forecasts for houses, units Numerous factors, including tighter credit rules and the growing supply of new stock, have reined in Australia’s seemingly unstoppable housing market boom ... Read more

Broking industry wants to reform commission structures Broking industry wants to reform commission structures It argues that scrapping commissions altogether would push up the interest rates paid by consumers ... Read more

More mortgage news and articles

Sponsored Links

Friday, Jul 21, 2017
Top Featured Rates
Top Bank Rates

Get help choosing the right home loan

Whether you're a first homebuyer, looking to refinance, or investing, it's important to have the right loan for your needs. Just fill in a few details below and one of our trusted mortgage advisers will contact you.

A quick & easy way to find the right home loan
  • Purpose of mortgage
  • Household Income
  • How much do you want to borrow?
  • How much deposit do you have?
  • How much is your house worth?
  • How much do you still owe on your mortgage?
  • What type of mortgage do you have?

  • How much is your new home?
  • How much do you want to borrow?
  • How soon do you want a mortgage?
  • First name
  • Last name
  • Where do you live?
  • Phone number

Special Offers

Related Keywords