Have property investors missed the boat? Fixed rates are rising.

Property investors and home owners should factor in rising interest rates.

Why do I say this?

Well…mortgage brokers Mortgage Choice reports that  three lenders on its panel increased rates on one or more of their fixed rate products. For the first time in over three months, the company’s weekly interest rate averages for its panel of 24 residential lenders showed a rise in the three-year fixed rate, albeit a small one, to 7.37% from 7.33%. Three years is the most popular fixed term.The average one-year fixed rate also rose, to 7.03% from 7.02%, while the five-year fixed rate was steady for the second week at 7.81%. This compares to an average basic variable rate of 7.07% and standard variable rate of 7.36%, both of which have held steady for two successive weeks.

Mortgage Choice, spokesperson Kristy Sheppard said, “This week’s interest rate data from the 24 lenders on our panel shows a rise in the average rate for three-year fixed term home loans – the most popular type – after 14 consecutive weeks of falls.”

“At 0.04 of a percentage point it’s not a large increase but it is one that leads us to question whether fixed rates are now on their way up.

“Over the three months previous to this week our panel’s average three-year fixed interest rate had dropped by 0.46 percentage points. On a 30-year $300,000 principal and interest loan this is a monthly repayment difference of almost $95.

“On the flipside, the largest movement for basic and standard variable interest rate averages over the past four months has been only 0.02 of a percentage point for both loan types.

If rates are heading up, is now the time to lock in to fixed interest rates?

According to leading finance strategist Rolf Schaefer of Metropole Finance “That depends. Choosing between a fixed and a variable property investment loan is a very individual decision that must take into account the borrowers individual financial circumstances There are pros and cons to going either way. Some of our clients who are very sensitive to rising interest rates ‘hedge their bets’ by fixing a portion of their loans. If you were to fix, I would not fix for more than a three year period.

According to Schaefer “The take home lesson for property investors and home owners is to budget and factor a bigger buffer in your financial and property investment plans to allow for the inevitable rate rises to come. Of course, the good news is that if the economy does boom and inflation increases as expected, so will the value of your property.”

“Ultimately, there are still a few good years ahead for property investors until retail interest rates increase to about 9% and stifle this property cycle.”


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Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au

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