Up just lowered its fixed home loan rates by up to 0.65%

In an era of lenders raising rates, any cuts are always worth a look. Today online bank Up slashed interest rates on its fixed home loan terms by up to 65 basis points.

Here is a breakdown of the key rate changes by Up:

• 1-year fixed rates have been cut by 50 bp.
• 2-4 year terms were slashed by 60 bp.
• 5-year terms are down by 65 bp.

As a result, Up Home now has some of the lowest fixed interest rate home loans in the Mozo database, especially for longer terms.

Up Home fixed rates vs. Mozo database averages (18 December 2023)

Up’s variable home loan interest rate will stay the same at 6.15% p.a. (6.15% p.a. comparison rate*). For context, the average variable interest rate right now is 6.84% in the Mozo database (OO, P&I, LVR < 80%).

Are fixed home loans a good idea right now? It depends

The upside of fixing your home loan interest rate for a term is that your mortgage repayments will be the same for a period of time – and you avoid the headache of constant rate hikes. In an era of rising rates, the idea of having some sort of shield can be an attractive option.

But with the pace of Reserve Bank rate hikes expected to slow down in 2024 , are fixed interest rates a good idea when cuts may be on the horizon?

Mozo interest rates expert Peter Marshall recommends weighing the pros and cons of variable vs. fixed rates when comparing home loans. After all, what suits one person might not suit another.

“I’ve seen many situations where someone has locked into what looks like a really good fixed rate for three or five years, but by the time they get to the third year, the economy’s doing something completely different to what you expected, and the fixed rate you thought was great at the time is no longer a great deal,” explains Marshall.

“I think people are right to be wary of fixed rates – they can be a really good option in the short term, but longer term it’s really hard to come out of it a winner.”

Variable home loans also tend to come with more interest-saving features and greater flexibility, especially when it comes to refinancing.

However, for shorter-terms, fixed rates can act like a safe harbour in the rate storm. Borrowers budgeting carefully may decide they need dependability over vague promises of savings in the future.

“ Online mortgage lenders in particular can do some of the more exciting home loan deals on the market, so compare, compare, compare, and if you find something that could work for you, it’s worth investigating,” concludes Marshall.

Compare fixed rate home loans in the table below.