One in three homeowners fixed mortgage rates in past year

Over one in three (36 per cent) homeowners opted to fix their mortgage rates in the past 12 months (January 2020 – January 2021), according to research from RateCity’s consumer survey

The survey also showed that 21 per cent were considering fixing their home loan rate in this time. This is not surprising as fixed home loan rates have fallen to record lows since pre-COVID thanks to an historically low cash rate of 0.10 per cent.

While many respondents preferred variable home loan rates (33 per cent), the above figures still showcase the appetite of many Aussie homeowners towards nabbing a lower rate loan in this current low-rate environment.

However, Aussies still considering fixing their mortgage to a record-low rate may have already missed the boat. Earlier this week RateCity reported that the last 4-year fixed rate under 2 per cent hiked, marking the end of an era for low-rate long-term loans.

Is now the time to fix?

The reality is that ultra-low fixed rates will not be here forever. Reserve Bank of Australia Governor Philip Lowe indicated that the next cash rate hike may be expected as soon as 2024.

According to RateCity’s database, there are 60 lenders offering rates under 2 per cent. Of these, just 13 are variable. Before Covid-19 hit Australia (March 2020), rates under 2 per cent were non-existent.

Number of lenders offering rates under 2%

Source: RateCity.com.au

Australian lenders have taken almost all their record-breaking interest rates off the table. There are now only two home loan interest rates still at their record low point: BCU’s 1-year fixed rate at 1.67 per cent (3.84 per cent comparison rate), and Reduce Home Loan’s variable rate at 1.77 per cent (1.86 per cent comparison rate).

But just because some lenders have increased their longer-term fixed rates, doesn’t mean every homeowner should rush out to fix. Every financial situation is different, and homeowners must decide what suits their finances best.

Before you consider fixing, keep in mind that this home loan interest rate type comes with its own advantages and disadvantages.

Generally speaking, you won’t find features such as an offset account or redraw facility are offered. Extra repayments may also be capped or not allowed at all. And, if you want to leave the loan before the fixed rate period ends, you may be hit with a break fee.

If you’re still unsure whether to fix your mortgage, another option may be to consider splitting the home loan between variable and fixed. Check first whether your lender allows this feature as not all do.

This may provide some homeowners with a ‘best of both worlds’ option, as you can lock in a low fixed rate but also enjoy extra repayments or an offset account courtesy of the variable portion of the loan.

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