With speculation mounting that interest rates are set to rise, new analysis says homeowners can save thousands if they fix their mortgage rate now.
Analysis by Canstar shows if a borrower with a $500,000 principal and interest loan locks in the average three-year fixed rate of 3.32% now, they could save $221 on monthly mortgage repayments, or $8468 in total interest, over three years.
That is in comparison with a variable rate which lifts to 1.25% as forecast by some economists.
Canstar’s Steve Mickenbecker says although the average variable rate is lower than the average fixed rate, locking in repayments also gives homeowners certainty.
“There’s a whole generation of borrowers who have never seen a rate increase, so it will come as a shock to them when they see it,” Mickenbecker says.
CommBank head economist Gareth Aird says it’s not always about which way you’re better off, but it’s about peace of mind.
The last time interest rates rose in Australia was in November 2010.
Barrenjoey chief economist Jo Masters says many homeowners are locking in fixed rates.
“Thirty five per cent of outstanding mortgages are fixed mortgages. Prior to the pandemic it was 20 per cent,” Masters says.
