Future thinking should be shared. With that in mind our team publishes insights weekly to help keep you in the (k)now.


Hewison Private Wealth - Insights
Hewison Insights
Home Loan

Is now the time to fix my home loan rate?

Simon Curtain
Partner/Private Client Adviser
2 Nov 2015

The Reserve Bank of Australia (RBA) has kept interest rates at record lows for some time now, with the current interest rate at two per cent. This hasn’t however, prevented the big four banks and one non-major lifting variable home loan rates on both investor and owner-occupier loans. 

So as an investor, should you lock in a fixed rate that is lower than the variable rate? This is an age-old argument and there are pros and cons at both ends.

Fixed home loans

A fixed home loan rate provides certainty as interest repayments will not vary over time. However, it can have significant restrictions and may work against investors if rates decrease and you aren’t able to take advantage of these savings.

For example, between 2007 and 2008, the RBA cash rate was approximately 7.25 percent with concerns that rates could hit double digits. Those that locked in a fixed rate during this period would have missed out on the considerable savings generated by dramatically falling rates over the next few years.

A fixed rate can also have “break fees” meaning that if your circumstances change and you want to change your loan, be it to a variable loan or to another financial institution, it will cost you.

Trying to pick the best time to fix your home loan rate is a gamble because you are essentially betting against the banks’ economists who forecast interest rates into the future and use this data to arrive at a fixed rate.

I would only recommend a fixed rate to individuals that would not be able to cope with any interest rate increases.

Variable rate home loans

By keeping your loan variable – and therefore flexible, you are not locked in and have the benefit of making additional repayments on your loan. Also, these are generally lower than a fixed rate.

For savings over the long term, in my opinion it is preferential to go with a variable rate loan, even if the movement between variable and fixed rates fluctuate.

The information provided above is general information only and individuals should seek specialised advice from a qualified financial adviser. Please contact Hewison Private Wealth for more information.






Hewison Private Wealth is a Melbourne based independent financial planning firm. Our financial advisers are highly qualified wealth managers and specialise in self managed super funds (SMSF), financial planning, retirement planning advice and investment portfolio management. If you would like to speak to a financial adviser on how you can secure your financial future please contact us 03 8548 4800, email info@hewison.com.au or visit www.hewison.com.auPlease note: The advice provided above is general information only and individuals should seek specialised advice from a qualified financial advisor. The views in this blog are those of the individual and may not represent the general opinion of the firm. Please contact Hewison Private Wealth for more information.