The popularity of fixed rate mortgages will increase dramatically before the end of the year, one consumer advocate has claimed.
According to RateCity’s chief executive Damian Smith, the threat of rising interest rates will see the number of fixed rate mortgages rise after nine months of stability.
“The home loan market has been quiet this year mainly due to the Reserve Bank keeping the official cash rate at 4.75 percent since November 2010. The fixed mortgage market has been quieter still, with no significant movement since August 2010,” Mr Smith said.
Commonwealth Bank chief executive Ralph Norris last week said the Reserve Bank would more than likely increase interest rates two times before the end of the year.
“That means the typical household with a $300,000 mortgage at the average basic variable rate of 7.11 percent will see their monthly repayments increase by $97 with two 25 basis point rate rises,” Mr Smith said.
“The average three-year fixed rate is currently 7.41 percent and if borrowers are concerned with rising interest rates, locking in at this rate could save you over $1,200 in three years if variable rates rise by 0.50 percent.”