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Are home loan rates below 3% vanishing?

There has been a trend for the last month for fixed rates across the board to be increasing. Not only have we seen some banks increase their rates once, there are a couple of lenders which have increased two and three times. This comes off the back of fixed rates being significantly lower than variable rates for the last 12 to 18 months.

Many home loan customers jumped at securing a fixed rate in the low to mid 2% with even the lucky few snaring a fixed rate at 1.89%. But have these times gone?

Without a doubt, fixed rates have moved and continue to do so, with the most recent being NAB bank announcing further fixed rate hikes as of this morning. What we are now seeing for the first time in more than a year are variable rates lower than fixed rates.

Interestingly, some banks while increasing their fixed rates have simultaneously been reducing their variable rates. But what should you do?

While the Reserve Bank had initially stated that it was unlikely to increase the cash rate until 2024, there have been more signs that this may come earlier. Banks generally follow suit with any Reserve Bank increases but as we have seen, interest rate moves happen at any time.

So it is likely that we are in a market where interest rates will increase in the 12 months. The question is do you now lock in a higher fixed rate or take up a lower variable rate understanding that there is a good chance rates will rise in the coming year or two.

It is a decision you must make with advice and consideration of what your personal circumstances are. Factors which influence a customers decision whether to fix or not include capacity to make extra repayments,. the desire for an offset account, future plans for lump sum repayments which all can be restrictive in a fixed rate.

Decisions made now need to take into consideration not only what your circumstances are now but what is going to happen in your life in the next 1-2 years. Tailor your home loan interest rate to suit.


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