Yahoo Finance Rate hikes: This is the lowest fixed rate available
With a possible rate hike looming as early as next week, many mortgage holders may be wondering if they’ve missed the boat on a cheap fixed home loan rate.
After Wednesday’s inflation figures, which showed a major jump in the cost of living, most economists are expecting a rate hike sooner rather than later.
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The big banks have revised their forecasts, with CBA and Westpac predicting the first hike in June. ANZ and NAB are saying May is more likely for the first inflection above record-low interest rates.
For mortgage holders wondering if there’s still time to secure a cheap fixed rate before variable rates rise, RateCity research director Sally Tindall said the reality was the era of ultra-low fixed rates was “well and truly over”.
At the moment, there’s only one fixed rate under 2 per cent, with Unity Bank advertising a 1.84 per cent one-year fixed rate.
Tindall said that was “wildly different” to 12 months ago, when the big four banks were all offering fixed rates at 2 per cent.
“So if you are looking to fix, it’s going to be much harder to find a good deal,” she said.
“But that makes it all the more important to shop around and get something that's competitive.”
Some fixed rates are now closer to 3 per cent, which Tindall said was a huge jump from 12 months ago.
New borrowers are opting for variable rates
Unsurprisingly, the number of borrowers opting for a fixed rate has nose-dived as fixed-rate pricing has increased.
The proportion of fixed loans funded in the month of February was just 28 per cent compared to the mid-year peak last year, where 46 per cent of all new loans were fixed.
Think about your personal situation
Tindall said people spent a lot of time “trying to wargame and work out whether they're going to be better off on fixed versus variable”.
However, she said mortgage holders should also consider their individual finances and lifestyle when financing their loans.
“So, for example, if you like the idea of knowing exactly how much your monthly repayments will be and not having to lie awake every night stressing about what the RBA may or may not do next, then perhaps fixing is still a good idea,” she suggested.
On the flip side, some people prefer the flexibility of variable loans, such as the ability to make unlimited repayments and avoid costly break fees if they want to change lenders.
Variable loans also often come with an offset account.
A split loan is another option, she said, which is where the loan is part fixed rate and part variable rate.
“This is a good option, because you get to have a foot in both camps,” Tindall said.
“But again, it’s really important to understand the terms and conditions of what you're signing up to.”
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