Loan Purpose

Borrowers should consider fixed rate loans

With inflation still remaining high and the Reserve Bank of Australia (RBA) continuing to increase the official cash rate, borrowers should consider returning to fixed rate loan products.

 Home Loan Experts CEO Alan Hemmings said persistent inflation and a strong property market – driven by low stock levels and low vacancy rates – means the benefits of fixed rate loans should be examined.

 “If there are three more increases and it takes longer to start seeing the cash rate reduce, the cheaper one-, two- and three-year fixed rates currently available will look an attractive option,” Mr Hemmings said.

 Mr Hemmings said the strength in the housing market will also put pressure on the RBA to keep interest rates high.

 “This is all to do with supply and demand,” he said.

 “We have the lowest stock levels in 10 years. On top of this, vacancy rates across the country are generally sitting just above 1%, and landlords are seeing an opportunity.”

 Home Loan Experts Senior Mortgage Broker, Vivienne Than said that many of her clients had opted for a fixed rate loan.

 Than said one option for clients whose fixed terms on 1.99% were about to end was to refinance to about 5.39% at three years fixed, which would be very close to the assessment rate their lender used when they applied for the loan.

 “Banks also increase their rates out of cycle to protect their profit margins and many fixed rates are more competitive than variable rates right now,” she said. 

 “History shows banks will not pass on the full rate cut to the consumer when the cash rate finally gets reduced.”

 Home Loan Experts Senior Mortgage Broker, Jonathan Preston said that activity had picked up, and people were seeing the market move and did not want to miss out.

 “‘We will wait until the market stabilises’ or ‘we will wait to see what happens with rates’ were formerly commonly heard phrases,” Mr Preston said.

 “People are dramatically more eager than they were a few months ago.

 “I think a lot of it is pent-up demand from people who were putting off doing things over the last 18 months.”