Is it time to fix your home loan? 4 experts fight it out.

It’s impossible to pick the perfect time to fix the interest rate on a home loan, experts say. Even with interest rates in Australia at near historic lows, and with no clear prospect of the official level rising soon, there is no definitive method of choosing the ideal moment to lock in the lowest possible fixed rate. Decisions on where interest rates will go can’t be based on past trends or current offers. It’s only future movements that count. This means you might as well consult Paul the common octopus, which famously “chose” the correct winner of Germany’s matches in the 2010 football World Cup. But even that method might put you on a slippery slope … and you might still end up a sucker. Economist Saul Eslake says that with the benefit of hindsight, the best time to fix a home loan was in late August or early September. That’s when long-term government bond yields – the benchmarks for pricing fixed-rate mortgages – were at record lows. Saul Eslake “The bird has flown somewhat,” Eslake says. “There’s no expectation of the Reserve Bank [RBA] raising its official cash rate any time soon, although it’s possible that the major banks will nudge their variable rates higher in the new year. They’ve already done this with their investment loans and it’s what some of the smaller banks have done with their variable rate loans for home buyers.” Tim Bowcock, head of mortgage services at UNO home loans, says good fixed-rate deals can still be found, although the ideal opportunity may have passed. “It’s likely we are at or near the bottom of the interest-rate cycle, which is a good time to enter a fixed mortgage,” he says. “As for when rates will rise, that started last month with all of the major lenders increasing five-year fixed rates.” How much can I save by refinancing?Use UNO's calculator to estimate your savings. Calculate SavingsSince the US election, major lenders have increased their four- and five-year fixed rates from about 3.85 per cent to 4.39-4.59 per cent, which might make three-year fixed rates comparatively more attractive. “We have lenders on our panel with rates as low as 3.79 per cent per annum for a three-year fixed term,” Bowcock says. Property strategist Michael Yardney says it’s still a smart time for investors and home buyers to consider locking in a portion of their rates. “Interestingly, last week I chose to fix a portion of my loans because I think it’s a good time to fix,” Yardney says. “But I did it not because I was trying to beat the banks or time the cycle. I did it because it’s a form of cashflow protection for me because I have a substantial property portfolio. “Three years ago, a lot of people would have said that interest rates would be much higher than they are today. They were saying then that it was the best time for many years to lock in as well.” Jen Bakker, head of customer engagement at personal finance app Money Brilliant, says the main reason borrowers should fix their loans is if they need certainty over their repayments. “A fixed rate might suit people who are budgeting to meet increased expenses or a lower income for a time period,” Bakker says. Money Brilliant’s Jen Bakker Fixing can be a risk, she says, if circumstances change and a borrower needs to move for work reasons or upgrade their property, for instance. “The penalties associated with repaying a fixed-rate mortgage, particularly in an environment where rates are dropping, can be hefty.”

Split loans

Bowcock says borrowers wanting to lock in a low fixed rate might be better off taking out a split loan, where one portion is fixed and the other is variable.

“I don’t think anyone should be in a rush to fix all of their mortgage” – Saul Eslake “A good exercise is to calculate the increase in your regular repayment should the banks increase variable rates by 1 per cent,” he says. “If that difference would have a material impact on your lifestyle, then it is wise to split the loan into fixed and variable.” Eslake agrees. “Borrowers who are particularly anxious about the possibility of rates going up could still consider fixing some of their mortgage, but I don’t think anyone should be in a rush to fix all of their mortgage,” he says. Another advantage of split loans is they allow borrowers to make additional payments on the variable-rate portion, Bakker says. “Often fixed rates don’t allow additional payments or offer a capped amount that you can pay extra before you are penalised.” Michael Yardney Yardney says he learnt a long time ago to fix just a portion of a loan – not the entire amount. He also warns investors with multiple loans to be careful about locking in fixed terms that end simultaneously. If interest rates rise in the meantime, you may find it difficult to service your new loan repayments. Use UNO's calculator to estimate your borrowing capacity. How much can I borrow?Ultimately, Bakker says, the decision to fix a loan should be based on the borrowers’ circumstances, not anticipated interest movements. “Unfortunately, none of us has a crystal ball and the banks don’t always move in line with the RBA, leaving some uncertainty when it comes to being able to accurately predict rate movements.” Perhaps those wanting a definitive answer on the perfect time to fix a loan should consult the nearest octopus. Book in a quick call with our customer care team.Book a call in with UNO

Book Call Now

UNO home loans

Need help with your home loan?

UNO Brokers are available night and day for a quick review or your situation and bring expertise that will support better decision making that will save you time and money. Book in a quick call when it suits your busy schedule

Get Started
Try Plans, by UNO
Mortgage calculators completely reimagined
Get Started

Related Articles

TESTIMONIALS

What our customers are saying

Kyle Richards
October 10, 2024
Absolute legend, helped me through the first home buyers scheme, explained everything in a way that made sense, was very knowledgeable and a joy to work with.
Read more
Chloe S
October 8, 2024
Mike Parsons made it possible for us and the in laws to get 2 pretty complicated home loans. He helped us through everything and we'd be happy to use Mike and the team again for anything we needed. Thanks again!
Read more
Sam Rezai
October 2, 2024
I have gone through 6 different mortgage brokers prior to meeting Andrew Wyers. He is the most patient mortgage broker I’ve encountered and also the most knowledgable about the bank’s lending process and products available. It took me 1 year to find a house I was happy with and Andrew was always there to assist with any issues or questions I had; he always return my phone call, even on the weekends or when his away on holidays. The loan process was smooth and I had no complications. The process with Andrew was again nice and easy, he took the time to find and put together the right package that was suited to my situation. I have recommended Andrew to my family & friends and everyone have been grateful and completely satisfied with his service.
Read more
S Wilko
September 23, 2024
I had not dealt with Scott or UNO before finding them on the internet. Even as an Australian citizen living and working overseas, I knew obtaining a loan would be difficult. However, Scott went above and beyond what I expected from a mortgage broker. I genuinely don’t think you could find another company that works as hard as they did to get my home loan approved. I cannot recommend them highly enough. Everyone I dealt with at UNO were extremely professional and helpful. If you are looking for a broker, you would be mad not to give them a go. Thanks to Scott Wilkinson, Dalby Bajwa, Jena Lasquite and Andrew Pacini. Shaun.
Read more
Shan Liao
September 3, 2024
I had an outstanding experience with Tian Liu. He was incredibly professional and attentive, going above and beyond to meet my needs. His expertise and dedication made the entire process smooth and stress-free. Tian's deep knowledge of the market and commitment to finding the best solutions for his clients truly sets him apart. He was always available to answer my questions and provided invaluable guidance throughout. I highly recommend Tian Liu to anyone in need of a reliable and skilled broker!"
Read more
Nathanael Chin
September 3, 2024
Tian Liu provided exceptional service throughout the entire process. His professionalism and keen attention to detail were evident from the start. Tian consistently kept us informed and offered insightful advice that made us feel confident in our decisions. He truly cares about his clients and works tirelessly to ensure the best possible outcome. We couldn't be happier with his assistance and highly recommend Tian to anyone looking for a trustworthy and knowledgeable broker.
Read more
Patrick Winters
August 14, 2024
For the past three years, it has been an absolute pleasure to work with Mike Parsons. He has consistently helped us navigate commercial property loans with skill and efficiency. Mike’s timely and professional responses to our inquiries have been invaluable. We have built a strong, reliable relationship with him and eagerly anticipate continuing our collaboration in the future. We highly recommend his services.
Read more
Lee Robibaro
August 6, 2024
I am so thankful and grateful to have Scott Wilkinson as my broker. He not only looked after me every step from start to finish he gave me confidence and I was able to trust him and his expertise. My children and I are now happy in our new home and very appreciative of Scott's help. I will definitely be only having Scott as my broker from here onward as there is no mucking around and straightforward answers. Thanks again
Read more
Steve Mav
August 6, 2024
Scott and the whole team at uno have been amazing. Super responsive and helped us achieve a result that we couldn’t have possibly achieved on our own.
Read more
Thien Pham
August 5, 2024
Scott, Dalby and Jena were awesome to work with for my recent Home Loan, they are responsive and knowledgeable - which helped ensure a smooth purchase from pre-approvals to settlement. This is the second property I've purchased with UNO as my mortgage broker and would definitely recommend their services. Thanks again to the UNO Team for the awesome support.
Read more
Scott Hutchinson
August 5, 2024
I am writing this summary in support of recommending Mike Parsons as a Mortgage Broker. At the time of writing this, I have known Mike for 4 years and he has executed 4 mortgages deals for me (including 2 refinances) over that time. Mike has provided me incredible service as a mortgage broker as follows : - Works painstakingly on getting the scenarios together to provide you options that optimize your position. - Works inordinate hours on the detail necessary to support the scenarios. - Mike keeps you updated on the status and progress of the applications and also helps you work through answering questions and any complexities that may arise. -In my cases, given the complexities and timings of my situations , these application processes would take many weeks to finalize . Mike never gave anything other than utter commitment and focus to getting the job done. Mike acts as a true business partner throughout this whole broker /mortgage journey. I simply would only go to Mike for any future dealings on getting a loan from a bank (and as will my kids in the future !) . There is no way a bank (I have seen anyway) would provide this kind of time nor service to a customer. You can rest assured that once Mike has done the deal, you have ended up with the most optimized position taking into account all the variables/scenarios in play. Scott Hutchinson
Read more
Jason Seam
August 5, 2024
I've worked with Scott Wilkinson for my last 2 properties and he's been excellent. He sourced multiple options and didn't push a specific bank, tailoring his recommendations to me based on my requirements. I was specifically requesting a "medico loan" and Scott could navigate that extra requirement with expertise. When I was initially working with Scott, I was also trialling 2 other brokers and neither of those 2 had the same breadth of lenders, or could provide the same deals. I've referred multiple buyers to Scott and his team; one of them said to me after working with him, "how'd you find this guy, he's so good compared to all the other broker's I've worked with!" I'm going into my next purchase with Scott as my broker partner again. I recommend him to everyone
Read more

Try Plans by UNO

Mortgage calculators completely reimagined
Get Started