The case for and against fixing your home loan rate in 2019

Borrowers have been urged to think twice before fixing their mortgage rate as banks compete for new customers in 2019. But there’s also a flip side home loan customers need to be wary of.

BORROWERS have been urged to think twice before fixing their mortgage rate as banks compete for new customers in 2019.

On the other hand there are also warnings to be alive to the dangers of unexpected rate increases if lenders choose to pass on rising wholesale funding costs.

The Reserve Bank of Australia Board meets on Tuesday and despite it being unlikely the cash rate will move from a record low 1.5 per cent, experts say borrowers should pay close attention to what they are being charged, with some lenders sneaking in hikes.

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For example, ING has raised its owner-occupier principal and interest rate from 3.78 per cent to 3.93 per cent.

That follows a move by National Australia Bank to hike rates in recent weeks.

NAB was the latest of the big four banks to make an out-of-cycle rate hike, lifting their standard variable rate on January 31.

This pushed their standard variable rate up by 0.12 percentage points to 5.36 per cent.

Experts including financial comparison website RateCity’s spokeswoman Sally Tindall said borrowers should brace themselves for a “rollercoaster year.”

“The fall in the property market over the last year has led to a significant cooling in home lending,” she said.

“As a result banks are keen for new customers and one of the best ways to attract them is to offer competitive fixed rates.”

Many borrowers may consider fixing their home loan interest rates in 2019.

RateCity data shows on a $300,000 30-year home loan the lowest owner occupier principal and interest ongoing variable rate is 3.44 per cent, compared to one-year fixed at 3.49 per cent and three-year fixed at 3.69 per cent.

A slowing housing market, tightening lending conditions, the handing down of the financial services Royal Commission report tomorrow (MON) and a likely change of Federal Government means banks will have to fight harder for new business.

Ms Tindall warned if you fix your loan rate this year “you could miss out on the golden egg — an RBA rate cut.”

“But on the flip side you’ll be insulating yourself from a potential out-of-cycle rate hike from your own bank which could be just as likely this year,” she said.

For investors rates have continued to be massaged too — last week smaller lender Heritage Bank reduced investor home loan rates by 0.32 percentage points.

But Home Loan Experts’ managing director Otto Dargan said there are still some razor-sharp fixed deals to be snapped up.

“Fixed rates are relatively low with some lenders at the moment so many homeowners are choosing to fix,” he said.

“It pays to shop around as there are big differences between the rates offered by each lender.”

He said he expected falls on investment loan rates this year.

@sophieelsworth