Mortgage Borrowers Should Think About Switching To Fixed Rate Home Loans

Post by Sharat on September 7, 2018 · Under loans · Comments Off on Mortgage Borrowers Should Think About Switching To Fixed Rate Home Loans 

Over the last few months mortgage lenders have been raising their variable rates and passing on increased funding costs to borrowers. Many banks have lifted rates already and more are expected to follow. Experts say the cost of obtaining funding pretty much affects every lender in the market, so it is no surprise that rates are rising across the board. This means even if you borrowed from a big bank, you shouldn’t expect they will sit tight whilst every other lender seeks to manage the increased costs.

A silver lining

There is however a silver lining to the recent bout of rate hikes. A few lenders have started to cut their fixed rates which means that many Australians are now seriously considering switching to a fixed rate mortgage. In fact, if you are a homeowner looking to switch to a fixed rate mortgage, you will be spoilt for choice because there are plenty of options out there, particularly if you are looking at a lender outside of the big four.

Shiny offers

Contrastingly Westpac has chosen to follow a different route and introduced a number of incentives on variable rate mortgages in a bid to wrest market share from the competition and entice new borrowers. For example, a borrower taking out a variable rate mortgage of over A$1 million will be given enough Velocity Frequent Flyer Points to make a return trip to London from any Australian capital.

How much can you save by switching?

There are some pretty hefty savings to be had by switching from a variable rate to a fixed rate mortgage. For example, if you take out a $300,000 home loan to be repaid over 25 years, based on the average variable rate of 4.36 per cent, you would pay out $37,919 in interest. If you took a fixed rage mortgage with an average rate of 4.07 per cent you would pay $14,585 less over the life of the loan. That kind of saving is nothing to be sniffed at so make sure you shop around and get a good deal.

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