With recent rate hikes, millions of Aussies are asking one question, ‘Should we fix our mortgage?’ The answer is, it’s complicated. Here’s why.
For starters, you may have missed the boat. That’s because fixed rate loans have already more than doubled in anticipation of rate rises. Last year, you could fix your home loan at a rate of around 2% for 3 years. Now you’re looking at around 4.59% for a 3-year fixed rate and up to 4.99% for 5 years. However, standard variable rates are still hovering between 2 and 2.5%.
However, for some, it might still make sense to fix your mortgage now. Why? Because if you’re highly risk-averse and want to know exactly where you stand, fixing your mortgage will give you certainty.
While most experts expect the RBA to raise the cash rate by 1.5 to 2% over the next 2 years, some believe rates will rise even faster.
It all comes down to weighing up the pros and cons. For example, if you know you can afford to pay your mortgage for the next 5 years at 4.99% but it would break the budget if your variable rate hit 6%, you might want to fix your mortgage to give you a sense of security through certainty.
What about if you decide to stick with your variable rate?
The best advice from mortgage brokers is to shop around if your current rate starts with a 3. In that case, start comparing what else is on offer and then go back to your bank and ask them to match it. Be assertive. The worst that can happen is that they say no and you decide to explore the idea of switching to a different lender.
At the end of the day, everybody’s circumstances are different, meaning there isn’t a one size fits all answer. Having a chat to a mortgage broker can be a good place to start as they can provide impartial advice specific to your circumstances.