Will fixing your home loan interest rate pay off?

WITH the Reserve Bank tipped to keep the cash rate on hold next week, some experts are saying now could be the perfect time to fix your home loan.

HOME loan interest rates are continuing to fall but despite this some experts are saying now could be the perfect time to fix.

The Reserve Bank dropped the cash rate to a record low of 1.75 per cent in May and, with the potential for more cuts on the horizon, many borrowers have been left to decide whether or not to lock in their mortgage rate.

The cash rate is expected to remain on hold at 1.75 per cent next week.

Latest data from financial comparison website RateCity shows on a $300,000 30-year home loan the lowest variable rate loan is 3.59 per cent, while the lowest three-year fixed deal is not far behind at 3.67 per cent.

The site’s spokeswoman Sally Tindall says while many of the fixed and variable rate deals are similar, it’s unlikely fixed rates could plummet much further.

FIND the best home loan variable rate

Financial comparison website spokeswoman Sally Tindall doubts fixed rates will fall much further.

“Australians have typically been panic fixers which means we fix when rates are high and on their way down,’’ she says.

“So if you are thinking about fixing, now isn’t the silliest time to fix.

“A lot of lenders, when setting their fixed rates, do incorporate rate cuts so these low rates that we are seeing now may have already assumed another rate cut.”

But before choosing to lock in a loan there are multiple things to consider so that you don’t get stung. This includes revert rates which Tindall says are high on one-year fixed loans once this period expires.

Online lender loans.com.au chief financial officer James Austin says it’s a good time to check out fixed rates before they go up.

Loans.com.au chief financial officer James Austin said some fixed interest rates are in the mid-three per cent range.

“We could get to August and the RBA doesn’t cut and fixed rates do rise,’’ he says.

“There are some great deals out there now, we are offering a three-year rate at 3.67 per cent.”

But be aware that lenders can charge rate-lock fees to hold your interest rate when you buy a home that hasn’t settled yet.

Austin says splitting a loan between fixed and variable is often a good way to go.

Some fixed loans don’t have offset accounts and won’t allow you to make extra repayments and there are also break costs if you try to leave the fixed rate loan prematurely.

Home loan comparison rates are a good indication to work out the actual cost you are paying as they factor in all the fees and charges associated with the loan.

Originally published as Will fixing your home loan interest rate pay off?