Should your rate remain fixed or change to variable?

RateCity’s analysis found that in addition to lenders who have cut at least one fixed rate since the Reserve Bank of Australia (RBA) board meeting the August 2nd34 lenders raised their fixed rates during this period.

Variable rates remain the lowest offer from most banks, with’s 3.10% rate being the lowest rate of any lender, while the 3.49% variable rate of Westpac over two years (which rises to 3.89% from this point on) is the lowest among the big four.

Alternatively, the Credit Union Police’s 3.99% one-year fixed rate is the lowest available, while Westpac’s 4.89% four-year fixed rate is the smallest offering of any of the four big banks.

Using Westpac’s cash rate forecast – 3.35% by February 2023 before falling to 2.35% in 2024 – the financial services company provided information on how much the average existing customer would rate variable with a $500,000 25-year loan could save if he refinanced at the lower variable rate versus the lower two-year fixed rate.

Based on these parameters, after two years, a borrower could potentially save $13,850 by refinancing at the lowest variable rate of 3.10%. Savings would still be on offer if they were to refinance at the lowest two-year fixed rate – 4.49% – although at $12,246 they would be $1,604 lower than variable savings.

Even according to cash rate forecasts from the Commonwealth Bank of Australia, ANZ and NAB, the lowest variable options are cheaper than their fixed counterparts.

RateCity research director Sally Tindall said as borrowers cut their fixed rates over the next year, banks will need to step up their offering to ensure they are able to retain customers. .

“One way for banks to protect against losing customers during the refinancing wave is to lock people into a fixed-rate contract.

“At this point, a lower floating rate is likely to turn out cheaper than a short-term fixed rate, however, there is no guarantee that the cash rate will do what economists predict,” he said. she adds.

“Whatever you decide, be sure to shop around because the difference between an average transaction and a good one can be tens of thousands of dollars, especially for larger loans.”

Should your rate remain fixed or change to variable?

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Last update: August 23, 2022

Posted: August 24, 2022