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Fixed rate home loans are now the lowest rates on the market

Posted: 2 April 2020 2:40 pm
News

A mechanic fixing the engine of a car.

The coronavirus, financial forecasts and RBA decisions have made fixed mortgage rates incredibly competitive. For now.

The classic fixed versus variable rate dichotomy goes like this: fixed rates are higher but you have stability; variable rates are more flexible and usually lower. But that's not the case at the moment.

Right now you can get a fixed owner-occupier rate as low as 2.09%. It's as low as mortgage rates have ever gone. The lowest variable rate is a bit higher, at 2.39%.

Even some of the Big Four banks are doing special fixed rate offers as low as 2.19%. And the lowest fixed rate loan for investors is 2.39%. That's lower than the cheapest variable investor rate (2.79%) and on par with the cheapest variable rate for owner-occupiers. This is unprecedented.

Finder's lowest monthly rate tracker tells the story succinctly.

Here's how a rate of 2.19% affects your repayments compared to 2.59% (one of the lowest rates available on Finder right now and a good example of the "average" competitive rate).

Loan 1

  • Loan amount (30 years): $500,000
  • Interest rate: 2.59%
  • Monthly repayment: $1,999

Loan 2

  • Loan amount (30 years): $500,000
  • Interest rate: 2.19%
  • Monthly repayment: $1,895

That's a monthly difference of $104, or $1,248 a year.

Should I fix?

There's more to a mortgage than a lower interest rate. Variable rate loans tend to be more flexible and are easier to leave if you find a better deal elsewhere. Fixed rates, on the other hand, come with breaking costs if you exit the loan during the fixed period.

You also need to consider features. A home loan with a 100% offset account lets you build up savings while lowering your interest charges. A fantastic feature, and one more commonly found on variable loans.

Fixing means certainty in your repayments. That's what matters. You don't have to worry about repayments going up. And you accept the fact that if variable rates get lower, you'll miss out for a while.

And over time, variable rates tend to be lower than fixed rates. Exploring why fixed rates have fallen so low now will help you make a better decision for the future.

Why are fixed rates so low now?

The Reserve Bank of Australia cut the official cash rate twice in March 2020, sending variable home loan rates falling. But after the second cut, we saw lenders hold off on big cuts to their variable rates. Instead, they cut their fixed rates.

Here are several suggestions why:

  • Lenders want to help borrowers. The nice answer is that lenders have lowered fixed rate loans to help new borrowers and support the economy during the coronavirus pandemic. Virtually every lender touted lower fixed rates when announcing their coronavirus relief policies.
  • But let's not be fooled. Lenders also want to balance their product offerings and keep making a profit. Most Australian borrowers have variable rate mortgages. And lower fixed rates only help potential new customers. So keeping variable rates a bit higher is good business for banks. It also helps them keep rates higher on other products like term deposits and saving accounts (which is good for those customers).
  • The market thinks variable rates will go even lower. Variable and fixed rate loans are funded in different money markets. Decisions around rates are complex, requiring short and long-term forecasting. If fixed rates drop below variable rates, it's a sign that the experts think that variable rates will fall even lower in the future.

So if all you care about is getting the lowest rate possible, fixing now might not achieve that in the longer term.

Making the right choice for you

There's no right or wrong answer, it depends on what you're looking for. If you think locking in a low fixed rate now is a good deal (and it is), and you're less concerned with flexibility, then fixing could be a good move.

But always make sure the loan has the features you need, and be aware that breaking a fixed rate loan can be difficult. And if variable rates get lower, well, accept that you've made your choice.

Time to fix? Check out some competitive fixed rates in the table below

Data indicated here is updated
$
Loan purpose
Offset account
Loan type
Repayment type
Your filter criteria do not match any product
Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
HSBC Fixed Rate Home Loan - 2 Year Fixed Rate LVR 80% or below (Owner Occupier, P&I)
2.09%
2.98%
$0
$0 p.a.
80%
Lock in a competitive fixed rate for 2 years and buy your home with a 20% deposit.
Virgin Money Reward Me Fixed Rate Home Loan - 2 Year $300k+ Special offer (Owner Occupier, P&I)
2.29%
2.91%
$300
$10 monthly ($120 p.a.)
80%
Buy your home and lock in a low rate for the first two years. Get a $2,500 cashback when you switch to Virgin Money with a loan amount of $300,000 or more with an LVR up to 80%. You must apply by 28 August and settle by 30 October 2020.
UBank UHomeLoan - 3 Year Fixed Rate (Owner Occupier, P&I)
2.14%
2.41%
$395
$0 p.a.
80%
An online home loan offer with a fixed interest offer for 3 years.
Macquarie Bank Basic Fixed Home Loan - 3 Year Fixed Rate LVR ≤ 70% (Owner Occupier, P&I)
2.19%
2.53%
$0
$0 p.a.
70%
Get a low interest rate and a mortgage with flexible, basic features. No application or ongoing fees. Requires a 30% deposit.
Homestar Star Classic Owner Occupied Fixed Special
1.98%
2.51%
$495
$0 p.a.
80%
A very low 1-year fixed rate for home buyers. Requires a 20% deposit.
Well Home Loans Balanced Fixed Home Loan - 2 Year (Investor, P&I)
2.39%
2.78%
$250
$0 p.a.
90%
A 2 year investor rate with principal and interest repayments. Optional offset account with a $10 monthly fee. Not available for construction purposes.
MOVE Bank Complete Package Fixed Home Loan - 3 Year Fixed Rate (Owner Occupier)
2.19%
3.15%
$0
$395 p.a.
95%
Get a low fixed rate loan plus package discounts. 100% offset account attached.
UBank UHomeLoan - 1 Year Fixed Rate (Investor, P&I)
2.29%
2.84%
$395
$0 p.a.
80%
Investors can enjoy flexible repayments and an easy application process with this pioneering online lender.
Suncorp Home Package Plus Fixed - 2 Year Fixed Rate Special Offer $150k+ LVR ≤90% (Owner Occupier, P&I)
2.29%
3.32%
$0
$375 p.a.
90%
A low fixed rate loan available for borrowers with 10% deposits. Refinance to an eligible Suncorp loan and get a cashback of $2,000 or $3,000, depending on your loan amount. Other conditions apply.
Well Home Loans Balanced Fixed Home Loan - 3 Year (Owner Occupier, P&I)
2.27%
2.34%
$250
$0 p.a.
90%
A low 3 year fixed rate for home buyers. Add a 100% offset account with a $10 monthly fee. Not available for construction purposes.
Heritage Bank Fixed Rate Home Loan - 2 Year Fixed Rate (Owner Occupier, P&I) New Customers Only
2.59%
4.26%
$600
$8 monthly ($96 p.a.)
95%
Get a partial offset account and the option to make interest-only repayments.
CUA Fixed Rate Home Loan - 3 Year Fixed (Owner Occupier, P&I)
2.49%
3.99%
$600
$0 p.a.
95%
Pay no ongoing fees and lock in your rate for 3 years to organise your budget. Eligible new home buyers with low deposits can apply for the First Home Loan Deposit Scheme with this lender and avoid LMI costs.
Newcastle Permanent Building Society  Premium Plus Package Fixed Rate - 1 Year Fixed (Owner Occupier, P&I)
2.39%
3.85%
$0
$395 p.a.
95%
Enjoy a competitive rate with no application fee for this package loan. $2,000 cashback for eligible refinancers borrowing $250,000 or more.
Well Home Loans Balanced Fixed Home Loan - 3 Year (Investor, P&I)
2.44%
2.76%
$250
$0 p.a.
90%
A competitive 3 year investor rate with principal and interest repayments. Optional offset account with a $10 monthly fee. Not available for construction purposes.
UBank UHomeLoan - 1 Year Fixed Rate (Owner Occupier, IO)
2.29%
2.47%
$395
$0 p.a.
80%
A one year fixed rate offer with no ongoing bank fees.
Newcastle Permanent Building Society Real Deal Home Loan - Special Offer 1 (Owner Occupier, P&I)
2.59%
2.63%
$595
$0 p.a.
80%
$2,000 cashback for eligible refinancers borrowing $250,000 or more.
Heritage Bank Advantage Package - 1 Year Fixed (Owner Occupier, P&I) New Customers Only
2.59%
3.32%
$0
$350 p.a.
95%
Get a partial offset account and flexible repayments with this package loan.
Well Home Loans Balanced Fixed Home Loan - 2 Year (Owner occupier, P&I)
2.22%
2.34%
$250
$0 p.a.
90%
A low fixed mortgage with an optional 100% offset account. Not available for construction purposes.
UBank UHomeLoan - 1 Year Fixed Rate (Owner Occupier, P&I)
2.14%
2.46%
$395
$0 p.a.
80%
Fix your mortgage for 1 year with a very competitive rate and no ongoing fees.
Virgin Money Reward Me Fixed Rate Home Loan - 3 Year $300k+ Special offer (Owner Occupier, P&I)
2.35%
2.88%
$300
$10 monthly ($120 p.a.)
80%
A competitive fixed rate mortgage available with a 10% deposit.
Newcastle Permanent Building Society  Premium Plus Package Fixed Rate - 3 Year Fixed (Owner Occupier, P&I)
2.49%
3.68%
$0
$395 p.a.
95%
A two year fixed rate home loan with no application fees. $2,000 cashback for eligible refinancers borrowing $250,000 or more.
ING Fixed Rate Home Loan - 2 Year Fixed Rate (Owner occupiers)
2.29%
3.80%
$499
$0 p.a.
95%
Get a competitive rate along with flexible repayment options.
Newcastle Permanent Building Society  Premium Plus Package Fixed Rate - 2 Year Fixed (Owner Occupier, P&I)
2.44%
3.76%
$0
$395 p.a.
95%
Enjoy a discounted fixed rate and the ability to package the loan with other financial products. $2,000 cashback for eligible refinancers borrowing $250,000 or more.
Greater Bank Great Rate Home Loan - Discounted 1 Year Fixed LVR ≤80% ($150K+ Owner Occupier)
2.09%
3.53%
$0
$0 p.a.
80%
Get one of the lowest rates on the market with this fixed rate mortgage. Available with just a 10% deposit. Guarantor option available. NSW, QLD and ACT residents only.
UBank UHomeLoan - 3 Year Fixed Rate (Investor, P&I)
2.29%
2.74%
$395
$0 p.a.
80%
Pay no ongoing fees on this investment loan fixed for 3 years.
Virgin Money Reward Me Fixed Rate Home Loan - 2 Year LVR < 90 (Owner Occupier, P&I)
2.84%
3.01%
$300
$10 monthly ($120 p.a.)
90%
Enjoy a competitive fixed rate with no application fee.
Macquarie Bank Basic Fixed Home Loan - 3 Year Fixed Rate LVR ≤ 70% (Investor, P&I)
2.59%
2.89%
$0
$0 p.a.
70%
A principal and interest loan for property investors with a 30% deposit.
ING Fixed Rate Home Loan - 1 Year Fixed Rate (Owner Occupier with Orange Advantage)
2.34%
3.96%
$0
$299 p.a.
95%
Owner-occupiers can enjoy a discounted fixed rate, a rate lock feature and the ability to make additional repayments.
UBank UHomeLoan - 5 Year Fixed Rate (Owner Occupier, P&I)
2.59%
2.53%
$395
$0 p.a.
80%
A five year fixed rate offer with no ongoing bank fees.
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