Is now the time to fix?

October 04, 2017

“With speculation mounting that the Reserve Bank of Australia may soon raise the cash rate, many borrowers are left wondering whether or not they should fix their mortgage,” Mortgage Choice chief executive officer John Flavell said.

“Over the past few months, we have seen positive economic data emerging from both the domestic and global economies.

“In the US, the Federal Reserve has lifted the cash rate three times within the last 12 months. Closer to home, we have seen a strong improvement in employment, and a slight bounce back in consumer sentiment and business conditions.

“As a result, a number of economists are starting to suggest that we may see a rate rise as early as mid 2018.

“I wouldn't be surprised to see the Reserve Bank of Australia lift the official cash rate sooner rather than later. Of course, if and when rates do rise is anybody's guess.”

Mr Flavell said when speculation about a rate rise starts to gather steam, a growing proportion of borrowers look at their mortgage and question whether now may be a good time to fix their rate.

“Two questions I am often asked are: have interest rates bottomed, and, is now the time to fix?

“In my experience, it is very hard to pick the absolute top or bottom of any market – and this is especially the case when it comes to interest rates.

“Instead of trying to pick the very bottom of the rate cycle, borrowers should concentrate on selecting a product that works for them and their unique financial situation.

“The one thing I would say is there is a lot of competition and moving parts in the market at the moment, so it is critical that borrowers do not take a set and forget attitude towards their mortgage.”

Mr Flavell said borrowers should be reviewing their home loan and interest rate at least once a year, if not more regularly.

“Over the last few weeks, we have seen a number of lenders cut the interest rates across their suite of products in a bid to attract more business,” he said.

“As such, there is a lot of competitive variable and fixed rate products available. Many lenders are currently offering interest rates below 4% for fixed rate periods of up to three years.”

Mr Flavell said the best thing borrowers can do is talk to their lender or broker on a regular basis and check to see they are still in the right product for their needs.