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Mitchell Watson, Research Manager at Canstar discusses fixed vs variable home loans and whether with interest rates so low, now is a good time to fix.

Video Transcript

Should I fix my home loan is a common question at the moment, particularly with interest rates so low. Our official cash rate is at an historic low of 2.5% and so are our home loan interest rates. In fact never in the entire 20 year history at Canstar have we recorded home loan interest rates as low as they are now and borrowers are taking advantage by fixing all or part of their loan before the curve starts going the other way.

What sort of rates are we seeing? Currently the standard variable interest rate on our database is 5.44% compared to the average 1 year fixed rate of 4.93%, average 3 year fix of 5.10% and average 5 year fixed rate of 5.69%, obviously there are rates lower and higher than the average.

With currently low rates, more homebuyers than previous years are deciding to fix their loan. Fixed rates are still less than 20% of all owner occupied home loans settled but there is certainly an increase in the proportion that are fixing.

If you are thinking of fixing your home loan to take advantage of currently low interest rates, there are a couple of points to consider.

Firstly repaying a fixed loan early may result in large break costs so consider your future plans for example if you’re looking to upgrade or refinance before deciding on the term you want to fix for.

Secondly fixed rate loans in general are less featured and less flexible however we have noticed a new breed of fixed loans coming out with offset accounts and fewer restrictions.

Do fix if you want certainty in your repayments and if you are unsure consider fixing part of your mortgage rather than the full amount.

If you are considering fixing don’t fix for fear of future interest rate increases, consider all your options and make sure it’s the best choice for you.


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How to get the best rate on a home loan?

2007-05-21 20:20:09 by mml510

I am looking into refinance into a 5yr ARM since that's about how long I plan to stay in my current home.
How do I go about getting the best interest rate.
I have excellent fico score (over 800+), and loan will not be a jumbo, and this is for primary residence.
I am not interested in interest only/neg am loans.
Are brokers or banks better for refis. Has anyone tried the online banks i.e. E-loan or ING direct.
What are closing costs/origination fees (basically all fees excluding points) going to add to up. Is it usually about 1% of the loan or more

Information on getting a loan for business

2006-03-14 14:20:58 by LAjoy

I'm trying to pull together some information on obtaining capital for investment into a business ($100K). I'm comfortable with the level of due diligence we'll undertake, but I could use help with identifying available resources. I have about $300K in home equity I can tap if necessary (no other debts).
- I believe new business owners are generally required to personally secure a loan (hence my interest in comparing to loans secured by personal resources). Is this generally correct? Any pros/cons here?
- How do rates for business loans compare to a heloc?
- Is there a centralized resource for comparing business loan rates?
- What are the requirements for a business loan? I...

Compare the numbers after-tax

2003-08-20 16:52:28 by former_tax_guy

You can do a comparison of the two. Most mortgage lenders will supply you with the payment scenarios you have outlined. It would be difficult to know exactly because PMI premiums are not equal among all lenders nor are the interest rates you would pay on a first and second loan.
I might lean towards the PMI scenario for a couple reasons: 1) when you reach the 20% equity mark, it has become much easier to cancel the PMI without refinancing like you might do with a 2nd (some lenders are doing it based on comparable home prices without a full property evaluation; 2) PMI might become tax deductible in the near future.

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