On Wednesday major bank ANZ hiked fixed home loan rates across the board by 90 basis points - nearly a full percentage point.

Some home loan rates, especially interest-only and investor loans, now have advertised interest rates well above the 6.00% p.a. mark - some even flirting with 7.00% p.a.

This is a marked difference from 18 months to two years ago when many of these fixed products enjoyed rates under 2.00% p.a.

Now the rise in fixed mortgage rates is attributed to the RBA cash rate increases, as well as swap rates.

So, who's actually committing to these much more expensive fixed rate loans now?

Samuel Philipos, director of mortgage brokers Benevolence Financial Group (BFG), told Savings.com.au many of his clients are still favouring fixed rate loans for certainty.

"The logic behind this is that even though fixed rates are much higher, it’s about around certainty," Mr Philipos said.

"It’s the friction between lower short term costs and long term certainty and deciding between which of those two is more valued.

"We tend to see our clients focusing on two years' fixed and actively reviewing their loans in two-year timeframes. Two years also appears to be most competitive at the moment."

See Also: Compare Two Year Fixed Home Loans

BFG has not seen large numbers opting purely for fixed rate home loans, however split loans are increasingly popular.

"A fifty-fifty split between them seems to be a good option for those that don’t want to guess what will happen in the future," Mr Philipos said.

"No one knows what will happen in a few years, we can look at early leading indicators such as inflation rates domestically and globally, unemployment rates, RBA predictions and statements."

A higher fixed interest rate is the price consumers pay for certainty according to Mr Philipos.

"It’s important to note that fixed rates have historically always been much higher than variable rates given the certainty they provide," he said.

"With inflation rates globally at high levels and interest rates globally increasing, it appears that it’s unlikely for rates to decrease anytime soon."


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Important Information and Comparison Rate Warning

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. Some products will be marked as promoted, featured or sponsored and may appear prominently in the tables regardless of their attributes. All products will list the LVR with the product and rate which are clearly published on the product provider’s website. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of March 1, 2024. View disclaimer.

Photo by Dmitry Osipenko on Unsplash





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