Property investors – more borrowers are fixing their mortgage

This year has seen the biggest proportion of borrowers locking in a fixed rate home loan for four years, while fixed interest rates continue to fall, according to Australia’s leading financial comparison website 

The latest figures by the Australian Bureau of Statistics found 5,953 fixed home loans were written in September, which is 53 percent more than September 2011 (3,900).

The proportion of fixed home loans out of all home loans financed in September was 13.7 and the average proportion for the year to September was 12.2 percent – the highest proportion of fixed loans in four years.

There were also almost 26,000 more fixed home loans written in the 12 months to September 2012, worth an extra $8.6 billion more than what was financed in the 12 months prior, according to RateCity.

Michelle Hutchison, Spokesperson for RateCity, said borrowers were taking advantage of the low fixed rate environment.

“Fixed home loan rates have been falling since mid-last year but we haven’t seen demand increase this fast for four years because of falling variable rates.

“But with fixed rates still on their way down and many remain lower than variable rates, it’s no wonder that more borrowers are taking advantage of these deals despite falling variable rates.”

According to RateCity there are 50 three-year fixed home loans (or 31 percent) that are below the cheapest variable rate, which is 5.40 percent by eMoney.

Three-year fixed home loans are starting from 5.13 percent by UBank – 27 basis points lower than the cheapest variable rate.

Mrs Hutchison said borrowers who are concerned about rising interest rates should consider a fixed home loan but prepare for less flexibility than a variable loan.

“While fixed home loans can potentially save borrowers thousands of dollars if variable rates remain above fixed rates, borrowers need to be aware of the restrictions that come with fixing.

“If you locked in the current average three-year fixed rate of 5.60 percent for a typical $300,000 home loan, you could potentially save over $3500 in three years compared to choosing the current average variable rate of 6.11 percent (assuming rates remain the same).

“But fixing your mortgage comes with a few catches. The main drawbacks are that they’re generally restricted to how much extra you can add to the balance and they can come with hefty break costs if you wanted to switch during the fixed period.

“Borrowers should be cautious about the conditions of loan contracts and make sure you compare features, rates and fees using RateCity to ensure you find a good value deal.”



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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 one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media. Visit

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