Why Fixed Rate Home Loans are in High Demand

  • Posted 22 Feb

Why Fixed Rate Home Loans are in High Demand

As a home owner or new home buyer, it’s likely that you’ve been hearing and seeing a lot of information that suggests you should be fixing your home loan rates.

The demand for fixed rate home loans has definitely increased over the past few years within Australia, and it’s set to spike in 2016 as home buyers look to cut down on costs and ensure they are living within their means.

Currently, almost one in five home loans are a fixed rate home loan. This is a significant increase from this time in 2014.



Why the Increase?


Generally, you’ll see an increase in fixed rate home loans following interest rate increases, which a majority of Australia’s lenders raised in the last quarter of 2015.

As a home owner, it’s important that you’re aware of the fact that Australia’s banks can increase variable rates as they please. So it’s not surprising to see this increase in fixed rate home loans.

New South Wales saw the highest increase in fixed rate home loans, with 25.35% of loans written in December being fixed.

South Australia and Queensland weren’t far behind, with close to 20% of home loans written being fixed.

Victoria had the lowest demand for fixed rate loans, with only 10.65% of loans written in December being fixed, the rest were variable.



What Should You Do?


If you’re currently reading this, wondering what you should do with your mortgage, or if you’re looking to a buy a new home, then you should chat to your current lender or a mortgage broker about your options.

It really depends on your specific situation. If you’re looking to start a family within the next 12-18 months, then fixing the majority of your home loan makes sense, because you can better budget for the inevitable changes ahead.

If you’re looking to get into property investing, then a combination of fixed and variable is going to be a smarter option, as you’ll need more flexibility with your home loan.

If you’re home life situation has changed; maybe you’ve lost one income or you need to make repairs to your home, then consider refinancing and fixing a bigger portion of your home loan.

Use a mortgage calculator as a starting point to figure out what your repayments would look like based on your specific needs.

If you haven’t reviewed your home loan in over 12 months, now’s the best time to do this. Watching the Reserve Bank closely and seeing what they do with the official cash rate is also a good idea.

Banks will react to any interest rises, but they are likely to pass on savings if the cash rate drops.

If you’re not sure where you stand, chat to a mortgage broker like Australian Credit and Finance. Our friendly team can provide you with information and advice on what your best strategy is moving forward. Contact us today!

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