Australian Property News
Are fixed or variable rates better?
Posted on Wednesday, July 15 2009 at 11:17 AM
Many borrowers are now starting to lock in the interest rate on their home loan, believing they may have reached their lowest level.
Demand for fixed rate loans has hit its highest level since July 2008, accounting for eight per cent of all loan approvals for Mortgage Choice in June 2009.
But variable rate loans are still favoured, making up 86 per cent of all loan approvals.
Kristy Sheppard of Mortgage Choice says in order to determine whether fixed or variable is best, it's necessary to look at the individual borrower's situation.
"Everything from lifestyle and life goals through to financial situation and investment strategy comes into play."
"However, if your situation sees you needing peace of mind over repayments then fixing part or all of your loan is worth considering."
Sheppard notes it's necessary to keep in mind that fixed rate loans are often less flexible, they can be more 'expensive' in terms of the interest rate and there may be break costs involved.
She says people have turned to variable rate loans in a big way over the past 18 months and demand for variable rate loans has been tracking at over 80 per cent since August 2008.
But despite lenders recently lifting fixed rate loan interest rates and talk of variable rates staying low for many months yet, Sheppard says demand for fixing rates has increased over the past three consecutive months.
"Although only eight per cent of all approvals for June were for fixed loans, it looks like we are over the downward trend seen during much of last year."
Sheppard says it's important to keep an eye on lenders and to carefully monitor whether they pass on any further cuts in the cash rate, then make a move from an educated position.
"Self education is so important, as is taking ownership over your mortgage situation."
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