'The time is not right' for fixed-rate home loans

Tuesday 22 September 2009

Article by Mozo

People looking for low interest home loans may be interested in news from one organisation.

The Loan Market Group has suggested house hunters should opt for a variable rate mortgage.

According to the firm, this is because consumers could pay more by switching to fixed-rate home loans since the rate cycle "bottomed out" six months ago, news.com.au reports.

John Kolenda, executive director of the organisation, explained it depends on individual circumstances, but that in general "it is really not worth fixing now".

He said this would even be the case if the Reserve Bank of Australia increased the national interest rates.

For example, householders could fix a $300,000 home loan for three years at 6.89 per cent. However, he pointed out that repayments would be more compared to an interest-only variable-rate mortgage.

"They could save more than $8,500 over the three years sticking to the variable rate even if rates went up 1.5 per cent, or by 0.25 per cent every three months," he commented.

People looking into the investment potential of properties may like to take heed of a report from St George’s Bank, which highlighted cheap property in the suburbs of major cities.

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