Home loan customers being urged to lock in rates

HOME loan customers should be fixing their home loans now because even if rates do fall again they will be better off, new findings have shown.

HOME loan customers should be fixing their home loans now because even if rates do fall again they will be better off by locking in, new findings show.

A majority of the fixed-rate home loan market has more competitive deals on offer than the average variable rate of 4.39 per cent and experts are saying it’s time for customers to take advantage of this.

New analysis by financial services firm Canstar has revealed on a $350,000 30-year home loan 87 per cent of three-year fixed loans are sitting below the average variable rate by 0.34 per cent.

But even if the cash rate was to fall at least once during this period customers would still be better off, their calculations show.

Home loan customers are being urged to look for interest rate deals around 4 per cent.

If lenders passed on a full 0.25 per cent cut, a borrower who fixed for three years at a rate of 4.05 per cent or lower would still be better off by at least $17 per month in repayments.

But if rates rose by 0.25 per cent and lenders passed this on, those borrowers would be $166 better off than if they remained on a variable loan.

The site’s spokeswoman Belinda Williamson said now was the perfect time for home loan customers to take action and make significant savings.

“With the additional pressure of the recent out-of-cycle rate movements from the banks borrowers will benefit from looking not only at the interest rate but also at the features that may help them to repay their loan sooner,’’ she said.

The appetite for fixing is on the rise — Mortgage Choice data shows in December 22 per cent of loans were fixed — an increase from 19.4 per cent in December 2015.

More borrowers are turning to fixed-rate home loan deals to save money.

Home Loan Experts managing director Otto Dargan said home loan customers should be hunting around for deals with a “three” in front.

“Borrowers should be seeking a rate below 4 per cent if they’ve got a variable rate home loan and just a little above it for a three or five-year fixed rate,’’ he said.

“There’s big differences between the pricing offered by different banks at the moment so it pays to shop around rather than just accept what your bank is offering.”

Of the three-year fixed rate loans available more than half are below the average three-year fixed deal of 4.11 per cent showing that there’s plenty of good deals to be had.

AMP chief economist Shane Oliver said he expects the cash rate to fall again in May.

Originally published as Home loan customers being urged to lock in rates