Buyers shy away from fixed-rate loans
Although interest rates are at record lows, fixed-rate loans remain less attractive to many borrowers, a home loan expert has cautioned.
Data from the Australian Bureau of Statistics shows the portion of fixed-rate financing in June 2014 was at the lowest level in 17 months.
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Just 14.26 per cent of all borrowers chose a fixed-rate loan over the month of June.
Michelle Hutchison, money expert at finder.com.au, said fixed home loans were not competitive with other loan types.
“Despite many lenders, including the major banks, dropping some of their fixed home loans in recent weeks, they have a long way to go before they are lower than variable rates,” she said.
According to finder.com.au information, the lowest variable home loan rate is 0.39 per cent lower than the cheapest five-year fixed-rate loan – a difference of $71 per month in repayments on a $300,000 home loan over 30 years.
However, Ms Hutchison said interest rates are expected to start rising again next year and borrowers should not rule out fixing their loan.
“This could mean that we won’t see fixed rates fall much further, so for borrowers who are worried about the higher costs when interest rates rise, it’s worth comparing fixed home loans for the security that repayments won’t change for the fixed period, even though they may not be as competitive as variable home loan rates,” she said.
