Fixed rate or Variable?

Posted on January 19, 2012


This is a question that many people are asking themselves. While rates dropped in both November and December of last year, many people are banking (heh, banking) on more rate cuts in 2012. So is signing up for a fixed rate home loan the smart thing to do? Or should you take out a variable rate loan and wait for the rate cuts to continue?

Note the rate is less than the above graph by 50 basis points.

It seems many people have already found the answer. Fixed rate. Here’s why:

“Fixed loans climbed from 10.6 per cent of new housing loans before the November cut to 11.1 per cent, the highest proportion since the financial crisis in 2008.” and;

“Excluding loans for refinancing, new loans climbed 2.5 per cent [in November].”

Mr & Mrs Jones have come to the conclusion that the current rates offered are better value than they have been for some time. With the pricing correction that happened over the last year others may be thinking the time is ripe to add another property to their portfolio or find that first house to move into. Take into account that many people have been keeping their wallets closely guarded, reducing their debt and saving their money in the past few years.  It seems we are wanting to deploy some capital and the time is right for ‘cheap’, or should I say, cheaper, debt.

Of course, the question is still up in the air, fixed or variable. It all depends on your personal situation. It may be a guessing game, but its hard to go past 6%.

In any case, home loans are on the up and its up to you to decide if you want to take a swing.