The Motley Fool

Is it time to lock in your mortgage rate?

The Reserve Bank of Australia’s (RBA) decision to leave the cash rate unchanged at 3% this week, has more borrowers asking themselves whether now is the time to lock in a fixed mortgage. With interest rates at all-time lows and expectations that the loose monetary policy cycle is either at or very near its low, many market watchers are suggesting this will be as good as it gets for borrowers.

The Australian Finance Group (AFG), one of the country’s largest mortgage brokers, reported in its monthly statement that the percentage of new borrowers electing to fix their mortgage rate has hit an all-time high of 29.6% in March. AFG also reported that borrowers were attaining fixed rates of “less than 5% that have widely been on offer.” These rates are impressive and significantly below the big four banks advertised 10-year fixed and variable interest rates of:

Effectively the above fixed rates are pricing in around a 1.3% increase in interest rates from the current standard variable rate. They also show how important it is for borrowers to shop around for the best deal! It’s no wonder that brokers such as AFG and Mortgage Choice (ASX: MOC,) along with the online comparison websites, are proving popular as they provide borrowers with a wide variety of options, such as “27 leading banks and lenders” in Mortgage Choice’s case.

Foolish takeaway

There are of course many decisions to take into account with mortgages, including any penalty fees involved with switching and your view on the long-term outlook for rates. With official interest rates so low, investors would be Foolish to not at least check that they are minimising their overall mortgage interest payments.

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More reading

The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.  This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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