Fixed rate home loans are becoming increasingly popular nationwide, with Queensland seeing the highest amount of interest, according to Mortgage Choice.
Fixed rate loans saw a 9.17 per cent increase in March, reaching 27.58 per cent of all new loan approvals nationally, Mortgage Choice data shows.
In Queensland, demand rose by 13.89 per cent to reach 36.94 per cent in March from 23.05 per cent in February.
Mortgage Choice spokesperson Belinda Williamson said that while choosing a fixed rate for all or part of a loan may provide security and peace of mind over repayments, borrowers should consider all the pros and cons of this loan type before locking in.
“Apart from the often talked about ‘break fee’, which applies if you repay your loan in full or choose to switch loans during a fixed rate loan period, there are other, often lesser known facts about fixed rates to consider when weighing up your loan options,” said Ms Williamson.
“One very important aspect of fixed rate loans is the time period when the interest rate is determined. Lenders may determine the interest rate when the loan is submitted or approved or when the loan settles.
“Some lenders offer borrowers a rate lock, often at a fee, which enables them to secure an advertised fixed rate for up to three months before their new fixed rate loan is due to settle.
“However, if the fixed rate drops between the time you lock it in and when you go ahead with the loan, and you want to take advantage of the lower rate, then you must request to end the rate lock and may be required to pay another fee,” she said.