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Think twice before fixing your home loan rate

Apartment buildings and property in Sydney, Australia and a person removing $100 notes from a wallet to signify to cost to fix a home loan rate.
Aussies thinking of fixing their home loan rate have been warned it may cost them more in the long run. (Source: Getty)

With the Reserve Bank of Australia (RBA) hiking interest rates for the third consecutive month, you may be considering switching to a fixed rate.

While a fixed rate will offer you stability in knowing how much your repayments will be for the term it’s fixed for, it might cost you more in the long run.

Mortgage broker Zippy’s financial director and principal broker, Louisa Sanghera, said the current fixed-rate offerings were significantly higher than variable home loan rates.

Sanghera said this meant some borrowers may lose out over the long-term if rates didn’t peak above their fixed rate mortgages.

“The real winners were those property owners who fixed their interest rates last year,” Sanghera said.

“Anyone wanting to fix the rates on their mortgages ideally should have done so last year when rates were in the 1-2 per cent range.”

Since the RBA started hiking the official cash rate, fixed rates have climbed to around the 4-6 per cent range, depending on the fixed loan term.

“[This] is generally well above the current variable option in most cases – even after the three successive cash rate increases recently,” Sanghera said.

What are the lowest fixed rates?

According to data from RateCity.com.au there are still some low(ish) fixed rates available but you’d have to turn away from the Big Four banks.

“Securing a competitive fixed rate in this environment is like finding a needle in a haystack,” RateCity research director Sally Tindall said.

“There is currently just one fixed rate under 3 per cent and that rate has a target on its back.”

Tindall said people wedded to the idea of fixing their rate would need to move quickly.

“A handful of low-cost lenders and smaller credit unions are still offering relatively competitive fixed rates, but these are unlikely to stick around for long,” she said.

“The variable rate market is a completely different story. Banks big and small are still falling over themselves to hand out discounts to ideal customers, primarily existing borrowers willing to jump ship from a competitor.”

Big Four Banks: Lowest rates

Rate type

CBA

Westpac

NAB

ANZ


1-yr fixed

4.99%

4.09%

4.69%

4.69%


2-yr fixed

5.79%

4.79%

5.59%

5.49%


3-yr fixed

6.39%

5.19%

5.79%

5.89%


4-yr fixed

6.59%

5.29%

6.19%

5.99%


5-yr fixed

6.69%

5.39%

6.29%

6.09%


Lowest variable

2.79%

2.64% for 2 yrs then 3.04%

2.94%

2.79%


Lowest home loan rates on RateCity.com.au

Rate type

Lender

Advertised rate


1-yr fixed

First Option Bank

2.99%


2-yr fixed

The Capricornian

3.39%


3-yr fixed

Queensland Country Bank

4.29%


4-yr fixed

QBANK

4.79%


5-yr fixed

IMB Bank

4.89%


Lowest variable

Homestar Finance, Credit Union SA

2.44%


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