Why fixing your home loan could save you thousands: Preparing for future rate rises

• Mozo’s latest research found only 12% of borrowers have fixed their home loan, while 20% had fixed some portion of their loan
• Mozo’s analysis shows you could save $7,160 by fixing your home loan for 3 years at the leading rate in its database of 2.40% instead of banking the leading variable rates and a potential 1.5% rate hike
• The leading three year fixing interest rate in Mozo’s database is 2.40% through Illawarra Credit Union
• The leading variable interest rate in Mozo’s database is 1.77% through Reduce Home Loans

As banks continue to hike fixed rates and speculation intensifies around when variable rates will rise, analysis by Mozo shows there is still time to fix some or all of your home loan to help guard against future rate increases. 

Mozo found you could save $7,160 by taking advantage of the leading three year fixed rate in its database of 2.40% through Illawarra Credit Union on an average $400,000 mortgage, compared to staying on the current leading variable interest rate of 1.77% and weathering a potential 1.5% rate increase. 

Despite the possible savings and the ability to reduce the impact of future rate increases, Mozo’s latest research found only 12% of borrowers have fixed their home loan and further 20% had fixed some of their loan amount.   

“There is little doubt that variable interest rates will increase before too long and return to their pre-pandemic levels, which could add thousands of dollars a year to the average home loan repayments,” says Mozo spokesperson Tom Godfrey. 

“The good news is that although the window to fix your home loan is rapidly closing as lenders continue to hike fixed rates, there is still time to take advantage of a number of low fixed rates still in the market.”

Mozo’s analysis shows that although there has been 3232 fixed rate increases since 1 November, there are still three year fixed rates as low as 2.40% which are 68 basis points below the current average variable home loan rate of 3.08%.

“Depending on your circumstances, locking in a decent fixed rate now before lenders start to hike their variable rates could give you a level of certainty around your monthly repayments,” Godfrey says. 

“It’s important to remember though that when the fixed rate period ends, you’ll most likely be dropped into a higher interest rate environment. If you have some extra cash on, you could consider making any additional repayments allowed under your loan terms or look for a fixed loan with an offset account.”     

When it comes to some of the best three year fixed home loan rates on the market, Mozo found smaller lenders are on top with Illawarra Credit Union offering 2.40%, Australian Mutual Bank offering 2.48% and Homeloans360 offering 2.49%. The leading big bank three year fixed rate is 3.44% through NAB or Westpac.

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