Mortgage rates: to fix or not to fix?

Mortgage holders in Australia are asking themselves a pertinent question at the moment: should they fix their mortgage interest rates, or ride the wave and hope that rates stay low?

The RBA's massive 50 basis point increase on Tuesday to 0.85 percent is the second in what is expected to be a series of rate hikes over the coming months.  

This marks an increase from last year and two increases in as many months! The pressure is now on for thousands of homeowners across Australia on variable mortgages as they may see their interest rates increase by up to 1.5 percent within the next few months. 

While some lenders are still absorption-buffering and have not yet passed on the full extent of the RBA's June hike to customers, there is no doubt that rates will continue to climb in the near future. This will put added pressure on already stretched household budgets and see many more Australian families struggling with their finances. So the big question is should you fix or not fix your mortgage rate?  

The gap between the standard variable rate and cash rates is narrowing, but it's still a good deal for those who are risk-averse and willing to live on the edge. However, experts believe that the sweet spot of switching has long gone, and if you have high fears about inflation or unemployment, this might not be the right choice. The RBA will most likely raise interest rates by 1.5 to 2 percent over the next two years, which means that borrowers taking out three-year fixed mortgages will have additional losses in the first two years before making up any ground.

At Concise Finance, we can weigh up the pros and cons of fixing your interest rate and help you make an informed decision that could potentially save you money in the long run. We can also advise you on which type of fixed-rate mortgage is best for your needs. So speak to our team today and remember that it's always better to seek professional advice for your finances!