Thinking of switching loans?

January 18, 2016
Naomi Dall

Are you worried about time running out for switching your loan?

New data from Mortgage Choice found 19.44 per cent of all loans during December were fixed-rate products, rising from 17.4 per cent in November. 

Nearly one out of five new home loans taken in December were capped at fixed rates, as Australian Mortgage holders become aware that Australia's banks, the majority of whom lifted the interest rates across their suite of variable rate home loans, can and will lift their variable rates as they see fit.

Large Australian lenders, who have blamed the rate rises on the need for banks to hold more capital to cover their mortgage loan, have raised their mortgage rates independently of the Reserve Bank of Australia, with Westpac leading the changes in October. 

Fixed-rate demand increased in four of the five states, but, despite this, variable-rate home loans – specifically ongoing discount loans – continued to be the most popular home-loan product among borrowers.

Hence it is critically important for borrowers to understand the difference between variable and fixed loans. Always compare interest rates, product features, and fees and charges. Even a small difference in the interest rate can make a big difference to your payments over time

Variable rate

Your interest rate goes up and down in response to changes in the cash rate and other changes by your credit provider. The advantage of variable rates is that they can go down if the cash rate decreases, which reduces the amount of interest you pay.

The opposite also applies: variable rates usually go up if the cash rate is increased, which means you will pay more interest. The rate may also increase even if the cash rate does not.

Fixed rate

A fixed rate allows you to lock in an interest rate on your loan, which can safeguard you against future interest rate rises. The disadvantage is you won't benefit from falling interest rates. 

To learn more or to have a chat about your loan, contact Peter Dall on 0414 583 233 or via email -  peter.dall@mortgagechoice.com.au

Posted in: Interest rates

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