AUSTRALIANS are locking in fixed rate loans at six-year highs but they are being warned to think carefully about the costs and traps involved.

Australian Bureau of Statistics‘ data shows up until July this year 17.4 per cent of borrowers fixed their loans, the highest level since 2007 when 20.4 per cent of loans were fixed.

Analysis from found the average three-year fixed loan rate among the big four banks is 4.98 per cent and has fallen significantly from two years ago when the average fixed rate was 7.23 per cent.

Fixed rate interest loans hit new lows

New government: What’s in it for property

Unit prices skyrocket 40 per cent

Fixed rates remain nearly one per cent lower than the average standard variable rate of the big four banks at 5.91 per cent making loan repayments on a $300,000 30-year-loan $1781 a month.

Many experts believe there may be one more rate cut by the Reserve Bank of Australia before the year’s end but many choosing to fix amid fees they will miss out on low-rate de

Resi Mortgage Corporation’s Chief executive officer Angelo Malizis said home loan customers looking to jump onboard the low fixed rates should take note of the additional fees and charges of choosing a fixed loan.

“When comparing don’t just compare on interest rate, compare on the fees and charges associated with the various loans, that’s the best way to make a true comparison with the loans,” he said.

“They should be aware of the comparison rate and they should understand what additional fees there should be for undertaking or taking out that loan with that particular party.”

The advertised rate and the comparison rate differ on loans – the comparison rate helps the consumer understand the true cost of a loan because it includes extra fees and charges.

Despite the banning of mortgage exit fees on variable rate loans in July 2011 borrowers still get stung with large fees on fixed rate home loans if they choose to exit early.

Most fixed rate loans often come with a “break fee” to exit the loan before the end of the fixed term and they often restrict customers to making any extra loan repayments.

But’s spokeswoman said Michelle Hutchison said consumers looking to fix their loans should look around at other financial institutions not just their current lender because there’s “so many good deals out there.”

Canstar’s research manager Mitchell Watson said despite fixed rates remaining historically low consumers need to think carefully before locking in a rate.

“In the past six months fees on fixed rates have come down in comparison to variable rates,” he said.

“Don’t just rely on the advertised rate, use the comparison rate as a tool but try and understand what fees are going into that.”


FEES associated with the loan.

BREAK costs involved if you exit the loan early.

WHETHER you can make any extra repayments on a fixed loan.

WHETHER you can have an offset account linked to the loan.

Read more:

Posted by Sophie Elsworth – News Limited Network on 16th September, 2013