Ask Paul: Is now a good time to fix my interest rate?


Is now a good time to consider fixing interest rates? My preference has always been a variable rate, but it appears the Reserve Bank doesn't have much room or appetite to move lower.

I am currently on a variable rate for all my three property mortgages; but it appears I can save a further 0.55% by fixing one or more of the loans for the next one to three years.

I was then hoping to place the interest I saved into super via salary sacrifice (up to the threshold).

ask paul clitheroe should i fix my mortgage rate

Considering I have a good-paying "secure" job, is this a wise choice? - Chris

Chris, I have argued against fixing home loan rates for nearly 40 years. The uncertainty has been all too hard. But you make a very important point. The Reserve Bank is clearly not in favour of negative rates of interest, so how much lower can they go?

Frankly, in this climate I suspect anything can happen, so my inclination would be to get the lowest-rate variable home loan I could and pay it off via an offset account as fast as possible.

With some trepidation, though, I do see the value in saving another 0.55% with a fixed-rate loan. The question is, if the world fails to recover in the next year or so, will rates go even lower?

With fixed-interest loans sneaking under 2%, it is hard to see how you could seriously disadvantage yourself, but maybe a bit of a fence sit and doing half fixed and half variable is as good a guess as any!

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Paul Clitheroe AM is founder and editorial adviser of Money magazine. He is one of Australia's leading financial voices, responsible for bringing financial insight to Australians through personal finance books, the Money TV show, and this publication, which he established in 1999. Paul is the chair of the Australian Government Financial Literacy Board and is chairman of InvestSMART Financial Services. He is the chair of Financial Literacy at Macquarie University where he is also a Professor with the School of Business and Economics. Ask Paul your money question. Unfortunately Paul cannot respond to questions posted in the comments section. View our disclaimer.