Industry split on fixed rate value

Jessica Darnbrough

Analysts and Australia's biggest brokerage are at odds over whether the time is right for borrowers to fix their mortgage.

Yesterday, Australia’s largest credit union, CUA, cut its three year fixed rate to just 6.75 per cent – making it one of the more competitive three year fixed rates on the market.

Similarly, Citibank trimmed up to 50 basis points from some of its fixed term products.

These latest announcements come less than a month after Bankwest, ANZ, NAB and Suncorp all slashed the interest on their fixed rate products.

With so many lenders cutting the interest on fixed rate products, consumers are starting to wonder whether or not now is a good time to lock in a fixed rate at a discounted price.

Last week BIS Shrapnel’s managing director Robert Mellor told The Adviser that now was definitely the time to lock in a good fixed rate.

However, AFG’s general manager sales and operations Mark Hewitt disagrees.

In fact, according to Mr Hewitt, home buyers have already missed the boat when it comes to fixing in at a good rate.

“I believe the horse has already bolted. The best time to fix is when interest rates have plateaued out at the end of a downwards cycle. Unfortunately, for home buyers, that time has now come and gone,” Mr Hewitt told The Adviser.

While some home buyers will be encouraged to fix in the current environment, especially as lenders continue to publically announce rate cuts, Mr Hewitt said he would be more inclined to ride out the current upwards rate cycle before locking in.

And it seems he is not alone.

Property Planning Australia broker Will Foster said while fixed rates were becoming “more and more attractive” to home buyers, he believes it is prudent to take a ‘wait and see’ approach.

“I think if the RBA lifted rates again, pushing variable rates within 25 basis points of fixed rates, then borrowers could look at fixing in at a low rate,” Mr Foster said.

According to the latest AFG mortgage index, fixed rates made up 5.1 per cent of all mortgages written in August – up significantly on the traditional 2 to 3 per cent fixed rates have accounted for in the past.