Lenders are increasing their interest rates on 4 and 5-year fixed-rate mortgages as they prepare for the end of central-bank sponsored cheap funding designed to lubricate the economy in the wake of the coronavirus pandemic.
That leaves those with variable-rate mortgages in a quandary – should they fix their interest rate now, just in case fixed rates rise further, wait longer before fixing, or stick with variable rates? Steve Mickenbecker, Canstar’s group executive financial services, says it is conceivable that after several rate rises, by the end of 2024, the average variable mortgage interest rate could be 2 percentage points higher than it is today – with fixed rates up even more.
Mickenbecker says a variable-rate borrower could fix for a 2-year or 3-year term now and lock-in interest rate savings, but they would likely end the fixed-rate term just as rates are on their way up. However, with the cash rate sitting at a record-low 0.1 per cent, the chances of getting caught out by fixing now are much lower than in the past, Mickenbecker says.
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