Life Hacks — Opinion: tossing up between fixed and variable rates? Here’s some advice to help you decide

JUST like casinos, banks almost always win. And this is what many people are up against when choosing fixed mortgage rates. Anthony Keane weighs up the pros and cons of the deals.

JUST like casinos, banks almost always win. And this is what many people are up against when choosing fixed mortgage rates.

Banks make money from the interest rates they charge and they are unlikely to consistently offer fixed-rate home loans that will weaken their profits. Research has found that riding the variable rate rollercoaster has generally delivered borrowers lower rates over long periods.

I fixed a mortgage rate once — for four years — after hearing forecasts of looming interest rate rises from so-called experts.

I locked in.

Rates went down instead.

I paid more interest than I needed to.

However, fixing is a good option for people wanting certainty of repayments. If a future rate rise or two will crunch your household finances, a fixed rate ensures you won’t get stung.

And, with the Reserve Bank’s official interest rate at a record low, economists say it’s unlikely to fall much further, so the downside of fixing is greatly reduced.

That’s the positives.

The negatives — apart from missing out on rate cuts — include a lack of flexibility compared with variable loans. Borrowers can get slugged with exit charges if they break their fixed rate loan, so they’re not a good idea if you are thinking about moving house.

Fixed rate loans also tend to have fewer features. Some lenders say a majority of new borrowers are signing up to fixed rate mortgages, so there’s no shortage of people willing to bet against the bank boffins.

Just remember that it’s a gamble if you’re doing it to get an interest rate win.