On 1 February 2021, we wrote an article on the economy and if fixed interest rates were at the bottom, and sure enough, less than two months later, fixed interest rates have started to increase. It appears that for some long-term fixed interest products were at the bottom in February.
One thing that we know about low interest rates, is that they certainly drive the property market. Securing a low interest rate on the biggest expense you have is key to living affordability, and it turns out a lot of buyers thought the same thing.
The property boom over the last 3 months has been insane to say the least. And it’s continuing with no immediate plans to slow. Properties on the Central Coast are selling in the shortest amount of time, including two properties in Bensville that sold in 2 days!
Banks increase fixed interest rates
Commonwealth Bank became the first bank to increase their fixed interest rates last week. Moving their 4 year fixed rate by 0.2% to 2.19%.
4 year fixed interest rates appear to the be the target of the increases. Bank of Queensland, UniBank, Teachers Mutual Bank, Health Professionals Bank, Firefighters Mutual Bank, and Adelaide Bank were among the second-tier lenders who increased their 4 or 5 year fixed interest rates.
However, CBA and several other lenders did decrease their 1, 2 and 3 years fixed interest rates.
That gives us an indication into the lenders psyche when it comes to standard variable rates and where they might be sitting in 3 to 4 years’ time. Which interestingly enough is when the RBA indicated that they thought interest rates would remain low for the next 3-4 years time.
Fixed interest rates from 1.84%
So, if you were to fix your home loan, what kind of rates could you get? Well, an owner-occupied property for a 2 year fixed loan on P&I arrangement will secure a rate of 1.84%*. And if you want a little longer, the same situation (owner occupied, P&I repayments) will get you 1.93%* on a 3 years or 1.94%* on 4 years fixed.
Now fixed interest rates are definitely still the cheapest option available at the moment, but if you need flexibility, variable interest rates are available from 2.19%* for owner occupied, P&I repayments.
If you were to compare the 2 year fixed rate of 1.84% with the variable rate over 2 years, if there were no interest rate increases during those 2 years, and taking into account the loan fees, you would be $5,337 better off on the fixed rate.
Definitely food for thought!
Talk to an experienced mortgage broker
There are many lenders, products and options to choose from, so it’s important to get the right guidance. Speaking with an experienced Sydney mortgage broker like Mint Equity is key to find the best interest rate and product for your situation. There’s no point securing a low 3 year fixed interest rate if you are planning to sell the property within two years, or you have additional income that could be utilised in an offset account to bring down your repayments.
Give the team at Mint Equity a call on 02 4340 4847 to discuss your needs both in the short term and long term.
*Rates are based on an Owner Occupied, Full Doc, Residential property with a loan of $800,000 and an LVR of 80%.