Is it too late to fix your mortgage?

Australian mortgage holders have probably missed out on the best fixed mortgage rates unless the Reserve Bank decides to cut interest rates by a further full percentage point, a financial analyst says.

Frank Lopez, financial analyst with Cannex, says the recent upward trends for interest rates in fixed loans suggest that unless the official interest rate is lowered to 2%, it is perhaps better to stick with variable rate loans. The RBA kept rates on hold yesterday at 3%.

“Have consumers missed out on the best fixed rates? It certainly looks that way, unless the RBA cuts the rate further by a 1% or so, which would shock anyone. But this will stand on individual circumstances really. It’s always a gamble either way.”

“It’s a hard question to answer without individual opinion, certainly what we’ve seen is that with funding costs for lenders, it appears the market is pointing towards interest rates moving slightly higher.”

Despite the official interest rate remaining flat at 3% for the past three months, interest rates for fixed-rate mortgages have risen.

NAB’s three-year fixed rate jumped one percentage point to 6.49%, while St George rose from 5.34% to 6.49%. Additionally, ANZ now has the lowest three-year fixed loan at 6.34%, with Commonwealth Bank at 6.69%.

The four major banks have also said the number of customers fixing their rates has increased, with ANZ and Westpac noting increases of 50% and 25% respectively.

Lopez says the rise in fixed rates has been due to an increase in the 90-day bill rate of May and June. He says that the outlook economic conditions means that it may be worth staying with a variable-rate mortgage.

“It’s difficult for anyone to predict what’s going to happen with the economy. I would suggest that property markets are stalling somewhat and with the outlook for employment pretty average as well, that doesn’t indicate the economy will go back into overdrive anytime soon. It may make it difficult to see variable rates rising that quickly.”

“If a mortgage holder doesn’t require too much certainty in repayments, it may be well worth sticking with variable rates now.”