A limited number of lenders are now offering fixed-rate mortgages whose interest rates start with a ‘4’, although variable rates continue to have a ‘5’ (at least) in front of them. So are fixed rates about to make a comeback and is now the right time for you to fix your loan?
That depends on your personal circumstances and what you anticipate will happen in the future.
Here’s what to consider if you’re thinking about fixing:
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Many commentators expect the Reserve Bank of Australia (RBA) to make at least one more rate cut in 2025 – and possibly more. Only variable-rate borrowers would benefit from those cuts immediately, although fixed rates may continue to trend downwards in a lower-rate environment.
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That said, there’s no guarantee the RBA will cut rates again. Furthermore, the RBA might need to make two more cuts before variable rates get cheaper than fixed. That’s because, since January 2024, lenders have generally charged lower interest rates on new fixed loans than new variable loans, according to RBA data.
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Variable loans generally offer greater repayment flexibility, such as redraw and offset, which means you can get ahead on your mortgage – which would offer peace of mind if the economy weakened further.
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However, if you want budgetary certainty due to cost-of-living pressures, you might be better off fixing your loan, even if it turns out to be slightly pricier in the long term.