We like the idea of having some of our home loan fixed ... we have been offered 3.56% variable but the 3-year rate is 3.99%. If there is no likelihood of rates moving then should we just choose the variable rate?

Hi Georgie,

I wouldn’t expect rates to go up any time soon. However over the next three years probably very likely.

Say rates stayed where they are for the next year, then went up. The variable rate would need to get up to about 4.5% over the next two years for you to be worse of than if you fixed for 3 years.

Banks don’t offer fixed rates so you can win the interest rate game. They offer them to give you certainty of repayment for a period of time and so they can win the interest rate game.

All the best.

James.

Hi Georgie,
The variable rate is great and the 3 year rate will give you peace of mind. I believe that we are likely to get one official rise in November as a test for returning rates back to the mid 5’s longer term. It is purely a guess of course.
The other thing is that lenders who source funds from open markets rather than from deposits will face pressure as we saw with ME bank lifting rates 0.14% this week.
I would recommend you went with something like 75% fixed and 25% variable so you have the flexibility to pay as much extra into the variable as you can during the fixed rate period.
I don’t know your personal circumstances so please discuss with a professional before making the final decision.
If you would like to discuss further, please feel free to give me a call on 0435.474.498
Regards
Scott