A world of fixed interest rates would never last. But borrowers can still get great deals on fixed and variable loans.
Westpac raised interest rates on a series of 2-year fixed-rate loans by 10 basis points this week. The move brings the fixed option of Westpac Home Loan Premier Advantage Package – 2-year LVR to 70% (Owner Occupier, P&I) from 1.79% to 1.89%.
This rate hike has implications for other Westpac lenders. St. George, Bank of Melbourne and BankSA all raised various fixed interest rates by up to 10 basis points.
The 2-year Fixed Advantage Loan Package, a similar product offered by all the above lenders, will increase from 1.84% to 1.89% (for BankSA it will go from 1.89% to 1.99%) .
As these are fixed rate offers, these changes will not affect the borrowers who already have these loans. Once the rate is established, the rate remains where it is. This is the core of these products.
But Westpac’s decision highlights three mortgage trends that borrowers really need to know.
1. Fixed rate hikes become a trend
More lenders they raised fixed rates recently, including UBank, Commonwealth Bank and Westpac itself. This comes at a time when fixed rate loansand home loan interest rates in general have never been lower.
Variable rate loans they are generally more competitive than fixed rate loans. But this has not been the case for the past couple of years. Lenders, who have long anticipated a low interest rate environment, have started offering fixed rates well below 2.00% to attract customers.
While fixed rate loans remain highly competitive, they are now definitely starting to rise. This will likely continue. The rates really couldn’t be lower.
2. Adjustable rate loans are not currently on the rise
While loan rates are constantly changing, floating rates generally don’t rise in the same way as today’s fixed rates.
Of course, getting a lower interest rate isn’t the only thing that matters when choosing a mortgage. Floating rates typically offer more flexibility and functionality, while fixed rates are more stable and predictable.
But it’s worth keeping the trend in mind if you try choose between fixed or variable rate.
3. You can still achieve a lot with a home loan
Whether you choose a fixed rate or a variable rate, the market is still full of highly competitive offers. Even with a 10 basis point increase, the loans we mentioned above are still some of the lowest rates Australian borrowers have ever enjoyed (as far as we can see in history).
But these offers are mainly for new borrowers. The dirty secret for most lenders is that they like to keep existing and loyal borrowers at higher rates.
So check your interest rate, see what other lenders are offering, and ask your lender for a better deal. They might say no. Okay, it is possible refinance at a better interest rate.