A research firm believes the best policy for borrowers in the current environment is to maintain flexibility with a variable rate loan but increase their repayments.
Andrew Willink, head of research firm RateCity, said the decision to fix or not to fix is a complex one.
“With the average three-year fixed rate at 6.5 per cent compared to an average variable rate of 5.25 per cent, you’re paying an extra 1.25 per cent for a guarantee,” Mr Willink told The Australian.
According to Mr Willink the impact of paying extra on your variable rate mortgage is more efficient than fixing, where your obligation remains the same even if rates continue to fall.
“The RBA has effectively said that rates will stay the same, or we’ll have another 25 basis point easing, in the next 6 to 12 months.”
Fixed rates have already begun to move up on the back of rising three and five year bond rates.
“Fixing is a far more useful tool when variable and fixed rates are about the same level,” Mr Willink said.
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