Some fixed home loan rates are over 6% so who's actually locking these in?

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on June 22, 2022 Fact Checked
Some fixed home loan rates are over 6% so who's actually locking these in?

ANZ has hiked fixed home loan rates by 90 basis points (0.90%), leaving some products' rates nearly triple what they were just over a year ago.

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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Photo by Dmitry Osipenko on Unsplash

Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered. Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site. Savings.com.au, yourmortgage.com.au, yourinvestmentpropertymag.com.au, and Performance Drive are part of the Savings Media group. In the interests of full disclosure, the Savings Media Group are associated with the Firstmac Group. To read about how Savings Media Group manages potential conflicts of interest, along with how we get paid, please visit the web site links at the bottom of this page.

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Harrison is Savings.com.au's Assistant Editor. Prior to joining Savings in January 2020, he worked for some of Australia's largest comparison sites and media organisations. With a keen interest in the economy, housing policy, and personal finance, Harrison strives to deliver and edit news and guides that are engaging, thought-provoking, and simple to read.

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