Fixed interest rate home loans have a built-in end point. This is typically between 1 and 5 years. After that, your loan reverts to a variable interest rate. This leaves you with 3 options:
Interest rates are much higher now than they were just a couple of years ago. If your fixed rate is about to end you could be in for a shock. Check current rates and use a mortgage calculator to see how much a higher rate will impact your repayments.
If your fixed rate ends and you do nothing, your lender simply moves you to a variable rate loan.
Let's say you locked in a 2-year fixed interest rate exactly 2 years ago. You got a great deal back then when all interest rates were very low.
Now the 2 years have passed and your loan reverts to your lender's current variable interest rate.
Your new loan has a much higher interest rate (because interest rates have risen a lot since you fixed). Now you're paying $568 a month more than before.
Interest rates were very low for many years. The Reserve Bank of Australia (RBA) kept the official cash rate target at just 0.10% for many months. This made it cheaper for banks to borrow and lend money, which benefited borrowers and stimulated economic activity (and soaring house prices).
You don't have to do anything now except make sure you can afford the repayments. But it's a really good idea to compare interest rates from other lenders to make sure you're getting a good deal.
Some lenders were offering fixed rates below 2.00%.
But in 2023 things are very different. The RBA is trying to keep inflation down. To do this it has increased the cash rate multiple times, driving interest rates up to levels not seen in a decade.
If you locked in a fixed home loan rate when rates were low, well done. You got a great deal. But what goes down must go up.
The end of a fixed rate period is a good time to think about switching, especially if your lender isn't giving you a good deal on your new variable rate.
Here's what you need to do:
Most lenders will let you lock in a new fixed rate. This is definitely an option for borrowers who value the certainty of fixed repayments over anything else or are worried about future rate rises.
Just keep in mind that if you fix your rate in today's market, the rate will be much higher than the fixed rate you could have got between 2019 and 2021.
But even if you really want a fixed rate home loan, you could still find a better option by comparing fixed rate home loans.
If your main concern is getting the lowest possible rate, a variable rate loan is going to be cheaper now.
For a period between 2019 and 2021 fixed rates were often even lower than variable rates. But that was unusual.
Read more about the differences between fixed and variable interest rate loans.
| Response | |
|---|---|
| Yes | 58.59% |
| No | 41.41% |
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