People considering a switch to a fixed rate home loan should act quickly because banks have started to raise fixed rates substantially, according to Australia’s largest independent mortgage broker.

Loan Market Group Executive Director John Kolenda said the Commonwealth Bank of Australia had this week increased its three year fixed rate by half a percentage point to 6.69 per cent.

Mr Kolenda said other major banks had also increased fixed rates by between 0.10 per cent and 0.50 per cent.

He said Loan Market Group had been advising customers for more than two months that fixed rates were on the way up.

“There has been a lot of attention on the CBA deciding to raise its variable rate by 0.10 per cent to offset higher funding costs, but there have been bigger movements with fixed rates,” Mr Kolenda said.

“Many consumers are unaware that the variable rates move differently to fixed rates and by the time variable rates have bottomed they have missed the best opportunity to fix.

“While variable rates are influenced by the Reserve Bank of Australia, fixed rates are quite different. Their pricing is driven by those who invest in the fixed rate wholesale markets.

“Variable rates are still lower than most fixed rates so it is important to consider your financial situation and motivation for fixing to determine if a fixed rate home loan is appropriate for your circumstances.”

However, Mr Kolenda said people considering a fixed rate, particularly if they required some certainty around repayments, should bear in mind that lenders often have special offers on fixed rate products that may assist in bringing the overall interest rate and loan costs down.

“A highly experienced mortgage broker is best placed to help find the right product for your financial situation,” he said.

Mr Kolenda said despite fixed rates moving upward, the RBA was still likely to cut the current cash rate of 3.0 per cent before the end of the year.

“We still believe there’s a possibility the RBA could lower rates in response to negative economic data but the major banks may hold back some or all of those future cuts, due to increased funding costs,” he said.