Fixed rates are the popular way to go

Jul 15, 2009 - Boris Chan

Home owners believe that variable interest rates have bottomed out and are rushing to lock in their rates.

The Australian has reported that 7.76 per cent of all loan approvals last month were for fixed rate loans, up by 6.6 per cent in May.

The demand for fixing variable rates has increased for three consecutive months; this was despite talk of variable rates remaining, low for quite a while yet.

Consumers in NSW were the most eager to fix their loan term with fixed loans comprising 12 per cent of loan approvals.

Demands for variable rate loans have been rising in line with Reserve Bank cuts to the longest cash rate to boost economic activity. Because expectations are rife in some quarters that the next cash rate adjustment could be an increase, borrowers are starting to consider fixing all parts of their home loans.

Home owners are faced with the decision whether to fix or not to, but with the average three-year fixed rate at 6.3 per cent compared to an average variable rate of 5.2 per cent you are paying an extra 1.25 per cent for a guarantee.

The RBA has stated that rates will stay the same or we will have another 25 basis point easing over the next 6 - 12 months.

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