The number of borrowers fixing their home loans has fallen

ONLY one in six owner occupiers are choosing to fix their home loans, and the rest who have taken a risky gamble are being warned about speculation of a rate rise this year.

JUST one in six owner occupiers are choosing to fix their home loans while the rest are taking a gamble on what interest rates may do in 2018.

Latest Australian Bureau of Statistics figures found in November 15.8 per cent of owner occupiers chose to lock in their interest rate — this has fallen from 19 per cent in August.

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The Reserve Bank of Australia board meets in 2018 for the first time Tuesday and it’s predicted they will keep the cash rate on hold at 1.5 per cent.

The cash rate in Australia has not moved since August 2016 but despite this fixed and variable rates continue to move.

The cash rate has failed to move since August 2016 but there have been rumblings this could change later in the year.

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Financial services firm Canstar’s group manager of research and ratings Mitchell Watson said borrowers should be considering their options as they may well save by locking in their rate.

“With fixed rates as low as they are and speculation of a rate rise in the later part of 2018 it is understandable why people may be considering fixing their loan,’’ he said.

“Fixed interest rates when compared to variable interest rates are very attractive with one, two and three-year fixed rates sitting lower than the average variable interest rates.”

Canstar spokesman Mitchell Watson said there is speculation of a cash rate rise later this year.

Canstar’s database shows on a $300,000 30-year home loan, the average standard variable rate is 4.42 per cent and monthly repayments are $1506.

However three-year fixed rate deals have an average rate of 4.09 per cent and monthly repayments of $1448.

In recent years banks have adjusted their interest rates in both directions, regardless of cash rate moves — this is mainly due to tougher lending restrictions, particularly on investor and interest-only loans.

Lender ME has reported an increase in customers opting to fix in the past six months, climbing from 20 to 25 per cent.

Australians typically rush to fix in their interest rates when the cash rate increases.

The bank’s spokesman, Matthew Read, said concerns over a cash rate rise could be the catalyst for more people locking in, but there’s much to consider before entering a fixed-rate arrangement.

“The main benefit of fixing is repayment certainty and it provides peace of mind your repayments won’t change over the designated period,’’ he said.

“Another benefit occurs if you lock in a low rate and variable rates subsequently rise.”

There are penalties for breaking a fixed-rate deal earlier and some other fees and charges apply.

There are also limits on how much extra a customer can repay each year and often these deals do not come with offset accounts to help reduce the overall interest charges.

@sophieelsworth