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Fixed rate loans: the flavour of the month
December 20, 2013
According to the Australian Bureau of Statistics, 17.4 per cent of borrowers fixed their loans up until July this year, the highest level since 2007. And it’s easy to understand why.
Fixed rates remain nearly one per cent lower than the average standard variable rate (SVR) of the big four banks at 5.91 per cent, making loan repayments on a $300,000 30-year-loan $1,781 a month.
The Reserve Bank (RBA) has been cutting the cash rate since November 2011, and it is now at the historically low 2.5 per cent. But will they cut further?
Industry commentators expect one more rate cut before the year’s end with many choosing to fix amid fears they will miss out on low-rate deals.
However, when choosing a mortgage it’s important to compare beyond the interest rate, and ensure you compare the fees and charges associated with the various loans to make a true comparison.
And whilst mortgage exit fees on variable rate loans were banned in July 2011 most fixed rate loans often come with a ‘break fee’ to exit the loan before the end of the fixed term and they often restrict customers from making any extra loan repayments.
Consumers looking to fix their loans should look around at other financial institutions not just their current lender as there are some good deals on offer.
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