Home News Is it the right time to go for fixed mortgage rates?

Is it the right time to go for fixed mortgage rates?

Font size :
With banks battling it out on fixed mortgage rates, mortgage owners may be attracted to switch from a variable home loan to a fixed home loan.

"The banks have been taking matters into their own hands in recent weeks, acting on, among other things, speculation that the RBA will cut again soon," said Peter Arnold of RateCity.com.au.

While some lenders have dropped their three-year rates to 3.67 per cent and their five-year rates to 3.99 per cent, Arnold argues that over the past two decades, variable rate borrowers were still better off 63 per cent of the time than those who opted for a fixed rate.

Locking in reduced rates when the rates are low can protect mortgage owners against a rise in variable rates when the cycle turns. However, Shane Oliver, head of investment strategy and chief economist at AMP Capital, says there are problems with this.

“Firstly in a normal cycle, this would work well but lately, we have been seeing rates go lower and lower,” he said. “So someone locking in what seemed to be a low fixed rate two years ago of 5.2 per cent for three years when discount variable rates were 5.1 per cent would now be feeling they acted too early because three-year fixed rates are at 4.4 per cent and discount variable rates are at 4.6 per cent with little prospect of a rise anytime soon.”

Another problem is that borrowers fix out of desperation when the rates are high because they can’t afford an even higher level of variable rates, hence making them miss out when the cycle turns down.

“This bad experience partly explains, I think, why fixed rates are not so popular in Australia compared to the US,” Oliver said.

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

Mortgage News and Articles

House prices return to more affordable levels in mining towns House prices return to more affordable levels in mining towns

While the end of the mining boom caused property prices to collapse, on the plus side, homes are more affordable again Read more

Borrowers should anticipate a possible rate hike Borrowers should anticipate a possible rate hike Some experts advise borrowers to look for a fixed loan that allows extra repayments so that they can whittle down the balance sooner ... Read more

Why choosing the right mortgage is hard for first-home buyers Why choosing the right mortgage is hard for first-home buyers Many feel overwhelmed by the sheer range of products and interest rates on offer, a new survey reveals ... Read more

Mortgage applications drop in second quarter Mortgage applications drop in second quarter This marks the “beginning” of a downward trend, says Equifax executive ... Read more

More mortgage news and articles

Sponsored Links

Wednesday, Jul 26, 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?
Next
  • First name
  • Last name
  • Where do you live?
  • Phone number

Special Offers

Related Keywords