Is it time to fix your mortgage?
Home loan rates are on the move and, for those with a largish debt, these apparently small adjustments can translate to a difference of tens or even hundreds of dollars in your repayment each month.
Many banks have increased their variable interest rates for owner-occupiers since mid-October (and the move upwards for investors starting several months before that) and borrowers wonder more and more whether now is a good time to fix.
Canstar's analysis of more than 160,000 home loan product searches on its database in 2015 has found a definite move away from variable home loan products by potential borrowers towards one- and three-year fixed-rate loans.
In March this year, more than 43% of visitors to our site were looking for a variable loan, compared with fewer than 35% recently, in October. By the middle of November the percentage of people looking at variable rate loans had dropped further, to fewer than 32%. Of course, that intention still needs to translate into action but it certainly shows that the fixed-rate loan interest is there.
So is it a good time to fix your mortgage? There's no one correct answer to that question, but, from a repayment point of view, history shows that borrowers have about a 50:50 chance of making the right decision.
Canstar's analysts looked at the average month-by-month variable home loan rate and the average month-by-month three-year fixed rate of the big four banks over the past 20 years. They determined that, since August 1992, there were 116 months when borrowers paid less over three years by fixing their mortgage and 127 months when they ended up paying less by choosing a variable loan. That's pretty close to a 50:50 bet! What about right now, though?
Currently on Canstar's database the average one-, two- and three-year home loan fixed rates available are all lower than the average variable rates on offer. The lowest one- and two-year fixed rates are also lower than the lowest variable rates.
Keep in mind, of course, that to secure the "lowest" rates you'll need good equity and good negotiation skills. Good luck!
Justine Davies, finance editor and commentator, Canstar