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Jessica Darnbrough
Despite a spate of recent data indicating that the popularity of fixed rates is waning, one company head believes now is the right time for mortgage holders to fix their loan.
Speaking to The Adviser, 1300HomeLoan’s John Kolenda said fixed rates are very low at the moment – lower than they have been in years – and as such, borrowers should think about fixing part or all of their home loan.
“Historically speaking, when fixed rates fell below 6 per cent, they tend to bottom out there and do not head any lower. So, that gives us some indication that the current fixed rates are about as low as they are going to go,” Mr Kolenda said.
“In addition to that, some of the fixed rates on the market are 30 to 40 basis points below the average standard variable rates offered by Australia’s banks, which means even if the cash rate falls again forcing variable rates lower, there is still quite a buffer.
“I think now is the time to fix part or all of the mortgage. Fixed rates are as competitive as they are ever going to be.”
In the last week alone, 16 of Australia’s lenders cut their fixed rates by an average of 13 basis points.
According to research by RateCity, the average three-year fixed rate now sits at just 6.01 per cent.
Analysts said that sinking global interest rates - triggered by continuing worries about the outlook for the world's economy - have lowered the costs Australian banks pay for fixed-rate loans.
But while Australia’s lenders continue to cut the interest on their fixed rate products, recent data from Loan Market Group shows the popularity of this type of loan is waning.
Enquiries for fixed interest rate mortgages have flat-lined since the Reserve Bank of Australia lowered the official cash rate to 3.5 per cent.
According to Loan Market Group, customer enquiries for fixed rate mortgages had fallen to around 15 per cent of total home loan enquiries – down from 30 per cent earlier this year.
