With out-of-cycle rate rises by the majors, we ask three brokers if fixed rate loans will be making a comeback any time soon.
With out-of-cycle rate rises by the majors, we ask if fixed rate loans will be making a comeback any time soon.
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Peita Davies
Choice Home Loans
Blue Mountains
I think a fixed rate mortgage suits certain clients in specific stages of their life cycle. For instance, if you have a young growing family and potentially stand to see some changes to household income … a fixed rate mortgage or even a split facility can give you certainty around home loan repayments for a period of time, that can be very beneficial when trying to budget.
On the other hand, whilst interest rates are at record lows and you have investment properties that you have as part of a long-term wealth strategy, it is a great time to consider fixing or to maybe even consider a fixed rate loan with P&I repayments (as these loans are cheaper than interest-only currently); this way you are also increasing your capital wealth. I think what Australians want most is education around options, and this is where brokers have a great opportunity for growing their clientele by providing exactly that.
Tom Hawley
Shore Financial
Sydney
Yes. I think Australians still want fixed rate mortgages. Almost all of my clients will proceed with some portion of their loan fixed in. I think most people look at fixing in completely the wrong way – they are trying to assess what is going to be cheaper over the fixed period out of fixed and variable, but it is not really about that.
Fixing is about reducing uncertainty, and as with anything in life, reducing uncertainty will generally cost you. I think it is far more important to consider the client’s personal situation and assess whether a fixed portion of their loan is the right option as a form of risk management for their cash flow. On average, though, I definitely find that clients are still interested in fixed loans.
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Adam Bourke
Mortgage Choice
Brisbane CBD and Paddington
It depends on the client, which is probably similar to most of the other states, I imagine. First home buyers are the most likely to do it, or investors. First home buyers, we find, may look to lock in 50–80% of their mortgage. It’s more peace of mind. I say to all my clients, ‘Don’t fix if you think you’ll save money over variable, because usually you won’t ... It’s normally about the direction that most perceived rates are moving.
So, if the media are talking about rate hikes, everyone is keen on locking in rates without realising the majors have already increased their fixed rates regardless. When Westpac increased their standard variable rate and the others started to follow, a lot of borrowers, particularly first home buyers, saw that as rates were about to start climbing … saying that, we’d be lucky to see 25% of borrowers fixing anything; any part of the loan.
Peita DaviesChoice Home Loans
Blue Mountains
I think a fixed rate mortgage suits certain clients in specific stages of their life cycle. For instance, if you have a young growing family and potentially stand to see some changes to household income … a fixed rate mortgage or even a split facility can give you certainty around home loan repayments for a period of time, that can be very beneficial when trying to budget.
On the other hand, whilst interest rates are at record lows and you have investment properties that you have as part of a long-term wealth strategy, it is a great time to consider fixing or to maybe even consider a fixed rate loan with P&I repayments (as these loans are cheaper than interest-only currently); this way you are also increasing your capital wealth. I think what Australians want most is education around options, and this is where brokers have a great opportunity for growing their clientele by providing exactly that.
Tom HawleyShore Financial
Sydney
Yes. I think Australians still want fixed rate mortgages. Almost all of my clients will proceed with some portion of their loan fixed in. I think most people look at fixing in completely the wrong way – they are trying to assess what is going to be cheaper over the fixed period out of fixed and variable, but it is not really about that.
Fixing is about reducing uncertainty, and as with anything in life, reducing uncertainty will generally cost you. I think it is far more important to consider the client’s personal situation and assess whether a fixed portion of their loan is the right option as a form of risk management for their cash flow. On average, though, I definitely find that clients are still interested in fixed loans.
Adam BourkeMortgage Choice
Brisbane CBD and Paddington
It depends on the client, which is probably similar to most of the other states, I imagine. First home buyers are the most likely to do it, or investors. First home buyers, we find, may look to lock in 50–80% of their mortgage. It’s more peace of mind. I say to all my clients, ‘Don’t fix if you think you’ll save money over variable, because usually you won’t ... It’s normally about the direction that most perceived rates are moving.
So, if the media are talking about rate hikes, everyone is keen on locking in rates without realising the majors have already increased their fixed rates regardless. When Westpac increased their standard variable rate and the others started to follow, a lot of borrowers, particularly first home buyers, saw that as rates were about to start climbing … saying that, we’d be lucky to see 25% of borrowers fixing anything; any part of the loan.
