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Date Published : Wednesday, April 02, 2008
Taking out a fixed rate home loan - in order to avoid any future interest rate hikes - may come at a cost in the long term, according to industry experts.
While many Australians take out fixed rate mortgages in order to guarantee security in the coming months and years, they still rank second in popularity behind variable rate home loans.
A recent report by Cannex said that the current high levels of interest rates will not continue "and it's very likely rates will come down at some stage of the fixed period leaving you locked into higher repayments".
In fact, a report by Yahoo! 7 found that analysis of Reserve Bank of Australia data since 1990 shows in the vast majority of cases borrowers would have paid less interest sticking with a basic variable loan than trying to pick the best times to fix mortgage rates.
Fixed rate home loans have traditionally been associated with rigid conditions, but with flexible new products available, fixed rate loans are currently quite popular in Australia.
A fixed rate home loan can be good if homeowners want to carefully budget their repayments.
However, some fixed rate loans still charge for making early repayments, which means that if homeowners' financial situation becomes more positive they will often have to either pay a fee, or keep the loan for the original term and pay the full interest amount.
Compare loan deals.
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