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Australian homeowners must be careful when deciding whether to fix their current home loans in the next 12 to 24 months.

Finch Financial Services founder Julian Finch said it is crucial for homeowners to be monitor economic development, particularly on inflation, if they are considering fixing their rates.

“While inflation appears to be cooling and moving in the right direction, there is still scope for some market volatility.  While everyone is hoping that rates continue to go down, the reality is that the world economy is in the midst of some fundamental shifts,” he said.

For Mr Finch, there are several factors to consider whether fixed rates are going to be beneficial to a homeowner’s financial health.

“The challenge is that there is no straight up answer to this question of whether to fix rates, and the answer greatly depends on each individual’s unique circumstances,” he said.

Mr Finch said borrowers’ credit records, home loan deposit, and chosen lender will influence how much interest they are going to get.

“Lenders will always offer new customers great incentives to switch and treat existing customers poorly in comparison,” he said.

“Work your lender and ensure you are getting the best rate possible. This is essential, especially if your loan is flexible. You may be able to negotiate a flexible rate that is equal to fixed rates elsewhere.” 

Zippy financial director Louisa Sanghera advised borrowers to carefully evaluate the difference in fixed rates compared to variable rates before considering refinancing.

“Borrowers should consider whether locking in these significantly higher rates is likely to benefit them in the long-term because no one knows when the current rising interest rate cycle will end,” she said.

End of rate hikes?

AMP chief economist Dr Shane Oliver said it is likely that the Reserve Bank of Australia has reached the peak when it comes to the current cash rate, as economic growth and inflationary pressures start to ease.

“We were way too optimistic as to how far the RBA would raise the cash rate, but our view remains that the RBA has done more than enough to bring inflation back to target and so we are likely at the peak,” he said.

Dr Oliver said the rate hikes since last year meant that a borrower with a variable rate for a $600,000 mortgage will have seen around $1,300 a month added to their mortgage payments.

Meanwhile, many of those on fixed rates are now starting to experience a bigger increase due to expiring terms.

“This has already seen housing debt interest payments as a share of household disposable income double from their lows. Once the rate hikes fully flow through it will likely go to a record high — this is a very big hit to household spending power,” Dr Oliver said.

In the short term, Dr Oliver said risks are still skewed to a further increase in interest rates due to inflation still being high despite easing and the labour market remaining tight.

“Absent much stronger wages growth, a further drop in unemployment and/or a reversal of the downtrend in inflation, the RBA is expected to leave interest rates on hold for the rest of this year ahead of rate cuts next year. We are allowing for four rate cuts through 2024 as the economy and inflation slow further,” he said.

Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner occupiers.

Update resultsUpdate
Filters
LenderHome LoanInterest Rate Comparison Rate* Monthly Repayment Repayment type Rate Type Offset Redraw Ongoing Fees Upfront Fees LVR Lump Sum Repayment Additional Repayments Split Loan Option TagsFeaturesLinkCompare
6.04% p.a.
6.06% p.a.
$2,408
Principal & Interest
Variable
$0
$530
70%
 Featured Online ExclusiveUp to $4k cashback
  • Immediate cashback upon settlement
  • $2000 for loans up to $700,000
  • $4000 for loans over $700,000
5.99% p.a.
5.90% p.a.
$2,396
Principal & Interest
Variable
$0
$0
80%
  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
6.14% p.a.
6.16% p.a.
$2,434
Principal & Interest
Variable
$0
$250
60%
  • Find out your loan eligibility in 2 minutes or less
  • Complete your application in less than 20 minutes
  • Low fees and fast approval times
5.95% p.a.
5.95% p.a.
$2,385
Principal & Interest
Variable
$0
$0
90%
5.94% p.a.
5.95% p.a.
$2,383
Principal & Interest
Variable
$0
$0
90%
Important Information and Comparison Rate Warning

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. Some products will be marked as promoted, featured or sponsored and may appear prominently in the tables regardless of their attributes. All products will list the LVR with the product and rate which are clearly published on the product provider’s website. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of .

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