While this week's 0.25% rate rise has worried many property buyers, it's provided some relief to those who have chosen to fix their home loans.

According to AFG, the proportion of borrowers choosing fixed rate mortgages has climbed by 40% over the past three months in anticipation of another rate rise in November. This sharp rise accounted for nearly a quarter (23.2%) of all new mortgages.

Borrowers also ignored 'doom and gloom' talk about future rate rises by taking up a large number of loans during October. Overall sales for AFG surged 18.7% - a solid turnaround from the 5.5% drop between September and October last year.
Mark Hewitt, general manager of sales and operations at AFG, said that borrowers clearly expect rates to rise so they're choosing to lock in their repayments. 

"We're also seeing a 'flight to safety' as buyers opt for financing from major bank brands as a result of funding issues of some of the smaller lenders," he said. "Our advice is that mortgage holders should review their arrangements at least once a year, and talk to a broker, to make sure they're getting the best deal."

Consider your options
Steve Blinkhorn, head of home loans at St.George, advised borrowers to consider their own preferences before making opting to fix their mortgages.

"Customers who are happy to lock in their repayments and not be too worried about what rates do are candidates for a fixed rate loan. We encourage customers to have a bit of both, that's splitting the loan as half fixed and half variable. You can maintain more flexibility with this approach, so you don't put all your eggs in one basket," said Blinkhorn.

Luke Sheales, national sales and distribution manager with Mortgage House, warned borrowers to be aware of the traps when choosing to fix. "The biggest trap for borrowers is time. People tend to fix their loans for three or five years and that's too long. Think back five years and I bet in most cases you didn't think you'd be doing what you're doing today. If you fix for a lengthy period and then your circumstances change and you need to break the fixed period of your loan, you'll most likely be up for extensive break costs."

He added that you could also be restricted or not allowed to make extra or lump sum repayments on your loan so he advises that you need to consider your situation carefully before committing yourself to a lengthy fixed rate term.

For practical tips on how to stay ahead of the rate rises, check out the latest issue of Your Mortgage magazine. For top ranking fixed rate products visit www.yourmortgage.com.au