Mortgage Choice is pleased to see the Reserve Bank of Australia maintain the official cash rate at 3% for a third month in a row, giving borrowers more time to prepare their pockets for eventual rate rises.

A number of lenders have already begun raising mortgage interest rates in recent weeks, sparking concern from borrowers that the much lower repayment levels experienced in the past several months may be short lived.

Mortgage Choice senior corporate affairs manager, Kristy Sheppard said that since increasing fixed rates began to receive attention last month there has been a marked rise in the number of proactive Australians enquiring about their loan options.

“People are realising that the time of historically low interest rates is probably coming to a close. Whether or not this is the case, we are pleased to see borrowers and potential property buyers using the relative respite in rate movements to thoroughly research their loan options,” she said.

“The steady cash rate may very well be a brief interlude before interest rates return to a more ‘neutral’ level. Nevertheless, borrowers or those looking to take out mortgages should assess their loan options while the market is relatively stable.

“Our franchisees are saying that Australians, in anticipation of interest rate rises, are especially eager to know the pros and cons of fixed vs. variable interest rate loans. The decision to fix part or all of the interest rate on a home loan rather than opting for a variable rate really depends on the individual. They should factor in everything from lifestyle and life goals through to their financial situation and investment strategy.

“If your major concern is security and peace of mind over future repayments then at least take the time to consider fixing all or part of your loan and perhaps establishing a rate lock or rate cap over that fixed rate. However, be aware that there is often a fee charged for these options.

“A ‘rate lock’ enables a borrower to secure an advertised fixed rate for up to three months before that new loan settles or the interest rate period on their current loan ends, depending on the lender. If the fixed rate drops between the time it is locked in and when the borrower wants to go ahead with the fixed loan, they must request to break the rate lock, which may incur another fee.

“A ‘rate cap’ is similar to a rate lock in that the interest rate on a borrower’s chosen fixed loan will not move upwards. However, a cap allows you to also take advantage of downward rate movements. If, on the loan settlement date, the advertised rate has fallen below your capped rate then you will benefit from the new, lower fixed rate.

“As an aside, borrowers should remember that any downward movement in the official cash rate may not be passed on by their lender. Lenders have already demonstrated that they are not obligated to match any cash rate changes, and some are more responsive than others.

“If you feel you may be missing out on peace of mind why not take ownership over your mortgage. Have a good look at your financial situation and where you are headed in life then consider the advantages and disadvantages of moving to a more suitable loan,”.

For more information visit www.mortgagechoice.com.au or call 13 MORTGAGE.