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The slow turn towards cheaper fixed-rate mortgages

The slow turn towards cheaper fixed-rate mortgages
Date of Publication: Monday, 08 July 2013 13:17

Homeowners are still keen on variable rate home loans, despite fixed-rate mortgages falling to record low levels over the past few months.

 

With three-year fixed-rate deals available from just 4.73%, there are signs that lenders have confidence in low central interest rates over the forthcoming years.

 

Australians still prefer to ride their luck with variable rate mortgages, despite the average rate remaining over 40 basis points higher than that of a fixed-rate loan.

 

One of the decisive factors is thought to be the flexibility of variable rate mortgages to allow overpayments, as opposed to the rigid nature of fixed-rate deals.

 

There are also heavy penalties, rolling into thousands of dollars, for attempting to refinance the loan during the fixed period.

 

But there are some signs of a change, as the lower cost and increased stability begin to dictate decision making.

 

Belinda Williamson of Mortgage Choice said that fixed-rate deals accounted for over 22% of all mortgage loans in the last financial year, a huge increase on the meagre 3% recorded in 2010.

 

Fixed-rates have traditionally been pricier than variable rates, with homeowners paying a small premium for the stability.

 

But with increased competition and the growing popularity of comparison sites keeping fixed-rates low, there could be a surge of new customers ready to sign up at rates below 5%.

 

Keith McDonald
Which4U Editor

 

If you found this article helpful, you can find more from us at our Finance Blog.

Monday, 08 July 2013 13:17
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