Quick fix not for everyone

People with mortgages are now wondering whether it's time to lock their loans into fixed rates. Fixed interest rates have already started to rise and will probably continue to do so until the variable rate follows.

For home buyers, picking the low point in interest rate cycles is hard, but many economists believe that the variable rate has bottomed for the time being.

There are three choices for home buyers: stay with a variable rate, select a fixed interest loan, or split the loan so that part is fixed and the rest is variable. Fixing a home loan means that your interest rate is locked in before rates start rising, giving you peace of mind knowing that your repayments won't change for a set period.

But Wizard's Mark Bouris says that lenders charge a premium on fixed rate loans and that this is reason enough not to apply for one. It cancels out the point of locking in a rate in the first place, he says. Home buyers tend to choose the wrong time to fix their rates anyway, he adds, making the whole process a gamble.

There are other issues to consider in the choice between fixed and variable rate loans. BankChoice continually monitors the situation – read our latest report

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