Westpac, CBA slash fixed home loan rates up to 0.8% – time to fix?
Don't! It's a trap! Or more accurately: it could be a trap.
CBA and Westpac are the latest banks to slash their home loan fixed rates this month.
Westpac reduced their 1-5 year rates by up to 0.80%, and CBA chopped its 1-, 2-, 3- and 4-year fixed rates by up to 0.70%.
They join Macquarie, NAB and half a dozen other lenders who have cut their fixed rates in recent weeks.
Another increase to home loan repayments is simply not an option for most of us, and the idea of getting off the rates roundabout by fixing your home loan can seem like a great idea.
But here's why you should think twice before you lock it in…
The data shows that homeowners have an increasing appetite for fixed rates. In February 2024, the value of fixed rate home loans nationwide was around $600m.
By May this had topped $1 billion, and in June it reached $1.388 billion.
There are plenty of really good reasons to fix your loan, like:
- So you can budget more easily. It's convenient and helpful to know exactly what your repayment will be each month, regardless of what changes the RBA or the bank makes.
- For peace of mind. It feels reassuring to know exactly what your mortgage costs, without the fear of yet another price hike.
- To stop thinking about your home loan. Once you lock in a rate, you can 'set and forget' for the rest of the loan term; ending your fixed rate loan early can cost a bomb, so fixing is something you should only really do if you know you won't want to sell the property or refinance during the fixed period).
And, there's one big fat reason NOT to fix your rates:
- To try and save money. Or beat the banks, or pay less than you would with a variable rate.
Sometimes, a fixed rate can end up cheaper than a variable loan. Just ask all those lucky ducks who fixed for 2% in 2021.
But banks are generally in the business of trying to make as much money as possible. They're slashing fixed rates at the moment because they forecast that rates will soon start to come down, and they want to lock in your business before that happens, and before competition heats up and you take your business to another bank.
How can you decide whether to fix or not?
These are really big discounts – a reduction of 0.7% to 0.8% is the equivalent of 3 rate cuts in one hit. So I understand the temptation.
If you want to budget more easily, and want peace of mind, and want to to stop thinking about your loan, AND saving money straight away seems like a good idea, then fixing your home loan might make sense.
But if you're doing it purely to save money, there's a decent chance you'll end up disappointed or frustrated if variable loan rates crash in the next 12 to 18 months.
One last thing: CBA has also nudged their variable rate loans down by up to 0.35%. The kicker is, these discounted rates are only valid for new customers. Existing customers are still paying the higher amount.
Which is why the very best thing you can do is decide whether you want a fixed rate or a variable loan; and then review ALL the options on the market, so you can get the best deal.
Haven't reviewed your mortgage in 2024? Odds are, you're paying more than you need to. Check out the latest refinancing offers or even get up to $4k cashback when switching to a new home loan