Home loan borrowers left in limbo on whether to fix their mortgage

NATIONAL Australia Bank and Westpac have raised interest rates on some variable mortgages, leaving borrowers conflicted on whether to lock in.

NATIONAL Australia Bank and Westpac have raised interest rates on some variable mortgages leaving borrowers in a spin on whether to lock in.

The Reserve Bank of Australia board will meet on Tuesday for the final time this year and it was expected Governor Philip Lowe will keep the cash rate on hold at a record-low of 1.5 per cent.

However, yesterday NAB said it would increase variable rates on investor home loans by 0.15 percentage points from next week.

Meanwhile Westpac has lifted its variable rates for all interest-only mortgages by eight basis points.

Up until yesterday, variable home loan interest rates had continued to fall while fixed rates climbed.

The lowest variable rate on the market is 3.35 per cent compared to the lowest three-year fixed deal at 3.49 per cent.

Reserve Bank of Australia Governor Philip Lowe is expected to keep the cash rate on hold at 1.5 per cent in December. Picture: AAP

New analysis by financial comparison website RateCity shows in November there were 36 variable rate loans deals that fell and the average drop was 0.17 per cent.

For three-year fixed rate deals more 64 loan offers rose, climbing by an average of 0.19 per cent.

RateCity spokesman Peter Arnold said there remained significant variation is loan deals and borrowers had plenty of rock-bottom deals to choose from.

RateCity spokesman Peter Arnold said there were plenty of home loan deals under four per cent. Picture: Supplied

“Right now we are seeing one to three-year fixed rates priced below variable rates for quite a while and that’s because we are expecting more cuts,’’ he said.

“It’s difficult to know whether these rates will be short-lived or whether this is the turning point; rates have been going down for five years.

“There’s still a lot of competition in the market, there’s some very low rates and more than half the market hasn’t moved them up.”

Many borrowers are at the crossroads of whether to fix their home loan as locked-in deals rise. Picture: istock

Online home loan market LoanDolphin’s founder Ranin Mendis said Australia’s risk of losing it’s AAA credit rating as the nation’s falls further into deficit could see interest rates climb in 2017.

“Because of this I believe that we will see a steady increase in mortgage rates in 2017 as banks face stiffer competition globally,’’ he said.

“This would have a flow on affect to property prices and we could see a slowing in growth.

“If homeowners or prospective buyers are concerned, it could be a good time to fix their loans particularly as there is a distinct possibility we may see banks stop or reduce their lending to high loan to valuation ratios.”

This month the Australian Securities Exchange’s rate indicator which monitors market expectations of a rate move, said there was a two per cent chance the cash rate would drop to 1.25 per cent on Tuesday.

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Originally published as Home loan borrowers left in limbo on whether to fix their mortgage