To fix or not to fix: it’s a question that many home buyers struggle with. On the one hand, locking in an interest rate provides certainty of repayments over the term (which can provide peace of mind when it comes to budgeting). On the other hand, staying variable means you can get the instant benefit of future rate cuts.

Analysis of the more than 130,000 visitors to the Canstar Home Loan tables this year has found a shifting preference towards fixed-rate home loans throughout the year. In January 2015, 45% of Canstar searches were for variable rate home loans, with 21% of visitors looking for 5-year fixed rates and 17% looking for a 3-year fixed rate. By May, after two cuts in official cash rate, the number of visitors looking for a variable loan had dropped to 37%, with the demand for 5- and 3-year fixed rate loans rising to
25% and 22% respectively. These figures have remained stable throughout the second half of the year to date.

For what it’s worth, analysis by our Research team has found that borrowers have a 50/50 chance of getting it right: comparing average 3-year fixed rates against average standard variable rates over the past twenty years has found that borrowers were ahead by fixing in approximately half of the 240 months considered.

That’s the history, but what about right now? Currently on Canstar’s database, average 1, 2, 3 and 4-year fixed loan interest rates are cheaper than the average standard variable home loan rate. The average 5-year fixed home loan rate is just one basis point (that’s, that’s 0.01%) higher than the average standard variable rate. Those figures indicate that our financial institutions are expecting further cuts to the official cash rate in the not too distant future. As I mentioned before though, they tend to be right about half the time!
Averages are only half the story though, and there is a great deal of financial benefit in shopping around for a competitively-priced home loan. Currently, eligible borrowers can potentially lock in a 1-year fixed home loan rate as low as 3.50% and a 5-year fixed home loan rate as low as 4.24%.

Borrowers shouldn’t forget about loan features; some of the most commonly-searched home loan features by the more than 130,000 visitors to Canstar’s Home Loan online selectors this year are offset accounts, redraw facilities and the ability to make extra repayments. These are all important features that our Research team also looks for when determining which fixed-rate loan providers provide a winning product line.

The Canstar Fixed Rate Home Loans Awards recognise the lenders across three segments (banks, customer-owned and non-banks) who are offering both competitive prices on their fixed rate loans and product flexibility. We hope you enjoy the report.


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