I came across this article on Australian Property Investor which was a good read.
There's a "massive" gap between variable and fixed rate home loans, according to an Australian mortgage broker.
Dean Rushton, chief operating officer of Loan Market Group, says banks need to justify the differential between the two rates.
Following the recent cash rate rise from three per cent to 3.25 per cent, many people are now looking at whether it's worth fixing their interest rates.
Rushton says they've experienced a 30 per cent increase in enquiries from homeowners about locking in fixed rate loans.
But he says most people were choosing to stick with variable rates because they have such a long way to go before reaching the fixed rates currently on offer from the major lenders.
"Given where fixed rates are at the moment, we have estimated that variable rates would have to increase by around three per cent over the next two years for a fixed rate to be worth considering."
"We have had a lot of people making enquiries about fixing but once you do the sums it becomes very difficult to justify."
"If you lock in now you could be paying around 7.5 per cent for the next three years or as much as eight per cent for five years."
"As variable rates are in the low to mid five per cent range, it's just not worth fixing."
Variable rates are influenced by the Reserve Bank of Australia while fixed rate pricing is driven by those who invest in the fixed rate wholesale markets.
This information was gathered from:
http://www.apimagazine.com.au/api-online/news/2009/10/its-better-to-stick-with-variable-rates
Thinking of buying or selling in Nedlands? Call me anytime
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