A leading mortgage broker has stated that borrowers have more than likely missed their opportunity to lock in low fixed home loan rates despite there being a forecast rise in lending costs.
John Kolenda Loan Market Group executive director stated that mortgage holders could eventually pay more if they were to switch from a variable rate home loan due to the fixed rate cycle having bottomed six months ago.
Financial markets are predicting rates to rise by at least 1.5 percentage points by the end of 2010.
Mr. Kolenda went on further to say that even if the official interest rate were to rise substantially and the banks passed on all the rate rises it was still not worth fixing he also said that borrowers could fix a $300,000 mortgage, for three years at 6.89 per cent but that their repayments would be higher, than those on an interest-only variable rate loan.
Borrowers could save more than $8,500 over three years by sticking with the variable rate even if rates went up by 1.5 per cent, or by 0.25 per cent every three months.
Every borrower has individual circumstances, but most of all for those who are paying interest only, it is really not worth fixing now. Borrowers thinking about a fixed rate have probably already left it too late.
Mr. Kolenda suggested that borrowers that were still undecided about whether to select a variable or fixed home loan should consult a broker to help calculate the costs and savings of various mortgages.
If borrowers are concerned about interest rates rising they should fix a part of their loan.