Fixed rate loans: borrowers lock in the best deals


INTEREST rate hikes by banks have caused anxious borrowers to rush to lock in rates before they rise again. Should we do the same?

Off-cycle interest rate hikes have pushed home loan repayments higher for many borrowers, and as a result, more and more people are turning to fixed rate deals.

Although both variable and fixed rate loans hover around the four percent mark, savvy borrowers looking to eliminate any potential rate hikes are choosing the certainty that comes with fixing.

The latest figures from one of the nation’s largest mortgage brokerage firms, Mortgage Choice, show that the popularity of fixed-rate deals continues to rise, and as of February, around 22% of all loans taken were blocked.

The Big Four banks last month lifted interest rates on numerous transactions, affecting both homeowners and investors, although the Reserve Bank of Australia kept the cash rate at 1.5 %.

But ME lender’s mortgage manager Patrick Nolan said interest rates were unlikely to drop much more and borrowers should consider fixing them.

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“Now is a good time to fix it because it is generally believed that the RBA will not go too low,” he said.

“We see a lot of clients trying to get the best of both worlds by splitting their loan and having a variable portion as well. “

Mortgage clients Ab Kilani, 31, and his wife Louise, 29, recently left one of the Big Four banks and refinanced themselves to get a better deal on their three-bedroom home loan.

This is the second time they’ve jumped on lenders in just three years to save money on their repayments, getting a new rate of 3.8%, down from 4.09%.

“The bank was dragging the chain on more competitive interest rates, so we switched to a smaller lender,” Kilani said.

“My take is that I don’t care who has a loan, a loan is a loan and whoever has my debt.”

Mortgage Choice chief executive John Flavell said there were a few things borrowers should always consider before deciding to repair their loan.

“Are you happy to keep a variable rate and potentially have more flexibility to make additional mortgage payments, or are you looking for certainty and stability in your current mortgage payments?” He asked.

“For people who want the best of both worlds – the flexibility of a variable rate combined with the stability and certainty of a fixed rate – a split rate mortgage may be the most ideal scenario.”

Fixed rate agreements have high breakage costs if the term of the loan is not over, and there are strict limits on the additional amount you can repay.


About Brandon A. Hood

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