A two-year review of the Australian fixed rate mortgage market

ANZ raised fixed rates on home loans by 90 basis points (0.90%), leaving rates on some products almost triple from just over a year ago.

On Wednesday, major bank ANZ raised fixed mortgage rates by 90 basis points, or almost a full percentage point.

Some home loan rates, particularly interest-only loans and investor loans, now have advertised interest rates well above the 6.00% pa mark – some even flirting with 7.00% per year.

This is a marked difference from 18 months ago and two years ago when many of these fixed products enjoyed rates below 2.00% per annum.

Now, the rise in fixed mortgage rates is attributed to increases in RBA cash rates, as well as swap rates.

So who is currently committing to these much more expensive fixed rate loans?

Samuel Philipos, director of mortgage brokers Benevolence Financial Group (BFG), told Savings.com.au that many of his clients still favor fixed rate loans for more certainty.

“The logic behind this is that even if the fixed rates are much higher, this is a certainty,” Mr. Philipos said.

“It’s the friction between short-term cost reduction and long-term certainty and the choice between which of the two is more valued.

“We tend to see our clients focus on two fixed years and actively review their loans over two-year periods. Two years also seem to be the most competitive at the moment.”

See also: Compare two-year fixed mortgages

BFG hasn’t seen a huge number of people opting for fixed rate home loans alone, but split loans are growing in popularity.

“A 50/50 split between them seems like a good option for those who don’t want to guess what will happen in the future,” Mr Philipos said.

“No one knows what will happen in a few years, we can look at early leading indicators such as national and global inflation rates, unemployment rates, RBA forecasts and statements.”

According to Philipos, a higher fixed interest rate is the price consumers pay for certainty.

“It’s important to note that fixed rates have always been much higher than variable rates given the certainty they provide,” he said.

“With inflation rates at high levels around the world and interest rates rising around the world, it seems unlikely that rates will come down anytime soon.”


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Are you buying a house or looking to refinance? The table below shows home loans with some of the lowest interest rates on the market for homeowners.



Lender


Variable More details
UNLIMITED WITHDRAWALS

Smart Booster Home Loan Discounted Variable – 2 years (LVR
  • Fast turnaround times, can meet 30 day settlement
  • For purchase and refinancing, down payment min 20%
  • No ongoing or monthly fees, add 0.10% compensation

Variable More details
REFINANCING ONLY

Variable Rate Home Loan – Refinance Only

  • A low variable rate home loan from a 100% online lender. Supported by the Commonwealth Bank.
Variable More details
AN EASY DIGITAL APPLICATION
  • No ongoing fees – None!
  • Unlimited additional refunds
  • Easy online application, quickly find out if you are approved!
  • Redraw – Access your extra payments if you need them
  • Use the app for loan information to help you pay off your home loan faster

Careful variable real estate loan (capital and interest) (LVR
  • No ongoing fees – None!
  • Unlimited additional refunds
  • Easy online application, quickly find out if you are approved!
  • Redraw – Access your extra payments if you need them
  • Use the app for loan information to help you pay off your home loan faster

Variable More details
NO CONTINUING FEES
  • No ongoing fees – None!
  • Unlimited additional refunds
  • Easy online application, quickly find out if you are approved!
  • Redraw – Access your extra payments if you need them
  • Use the app for loan information to help you pay off your home loan faster

Yard PAYG home loan (principal and interest) LVR ≤ 80%

  • No ongoing fees – None!
  • Unlimited additional refunds
  • Easy online application, quickly find out if you are approved!
  • Redraw – Access your extra payments if you need them
  • Use the app for loan information to help you pay off your home loan faster


Basic criteria: a loan amount of $400,000, variable, fixed, principal and interest (P&I) real estate loans with an LVR (loan-to-value) ratio of at least 80%. However, the “Compare mortgages” table allows calculations to be made on the variables selected and entered by the user. All products will list the LVR with the product and price list which is clearly published on the product supplier’s website. Monthly repayments, once the basic criteria are modified by the user, will be based on the advertised prices of the selected products and determined by the loan amount, repayment type, loan term and LVR as entered by the user. user/you. *The comparison rate is based on a loan of $150,000 over 25 years. Please note: this comparison rate is only true for this example and may not include all fees and charges. Different terms, fees or other loan amounts may result in a different comparison rate. Rates correct as of August 6, 2022. See disclaimer.


Photo by Dmitry Osipenko on Unsplash

The whole market has not been taken into account in the selection of the above products. Instead, a reduced portion of the market was considered. Products from some vendors may not be available in all states. To be considered, the product and price must be clearly published on the product supplier’s website. Savings.com.au, yourmortgage.com.au, yourinvestmentpropertymag.com.au and Performance Drive are part of the Savings Media group. In the interest of full disclosure, Savings Media Group is associated with Firstmac Group. To learn how Savings Media Group handles potential conflicts of interest, as well as how we are paid, please visit the website links at the bottom of this page.

Priscilla C. Carnegie