Borrowers In A Fix

The Age

Wednesday January 29, 2003

BRIDIE SMITH

An increasing number of home loan borrowers are opting for a fixed-term rate over the more flexible variable rate.

Australian Bureau of Statistics figures show that 36 per cent more borrowers fixed their interest rates for two years or longer in October, 2002, than in October, 2001.

National branch manager of the Investors Club Barry Atkins believes a large proportion of buyers fixing their rates are investors.

However, Mr Atkins cautions borrowers not to rush to fix their interest rate. He says nine times out of 10, financial institutions benefit more from lending money at longer-term fixed interest rates than borrowers.

"Overall, property owners are now living in a climate of low interest rates and this trend is likely to continue for the foreseeable future."

While there is no simple answer for the old 'fixed or variable' question, a decision

will depend on your individual financial situation and how willing you are to take a calculated risk.

When deciding whether to fix or go for a variable rate, there is more to consider than the interest rate alone.

For example, many fixed-rate loans won't let the borrower make extra repayments without a penalty. This can add both time and cost to the life of the loan.

For those who want to hedge their bets, consider a split loan structure.

Finance policy officer at the Australian Consumer Association Catherine

Wolthuizen says if borrowers decide to change from variable to fixed or vice versa, they should take into account the costs associated with refinancing a home loan. These can include discharge fees and establishment fees.

Top line-of-credit home loans**
Banks
Lender                  Product                         True rate       Lender
Total           Ongoing                 Exit
                        name                    AAPR*   rate    upfront fees
fees            fee
BankWest VIC/QLD        Gold Equity Release     6.38%   6.27%   Nil
$300/annum      N/A
Colonial                        Line of Credit Quarterly        6.45%   6.40%
Nil             $12/month       $150
Commonwealth Bank       Viridian LOC Quarterly  6.45%   6.40%   Nil
$12/month       $150
Suncorp                         Professional Asset Line         6.52%   6.47%
$725            Nil             $150
Suncorp NSW/Vic/Tas     Professional Asset Line         6.52%   6.47%   $750
        Nil             $150
Non-banks
Lender                  Product                         True rate       Lender
Total           Ongoing                 Exit
                        name                    AAPR*   rate    upfront fees
fees            fee
Wizard Mortgage Corp    Wealth Power            6.27%   6.22%   $760
Nil             $285
Easy Street Fin Services        EasyHome Equity                 6.30%   6.05%
$828            $500/annum      $100
Heritage Building Society       Living Equity           6.43%   6.35%   $647.50
                $8/month                $150
South West CU Co-op (Vic)       Wealth Builder Line of Cr       6.45%   6.35%
$750            $10/month       $122
The Rock Building Society       Revolving Line of Credit        6.45%   6.40%
$407            $5/month                $155
* AAPR is the annualised percentage rate - the rate after extra fees and charges
 are taken into account.
** Rates are for loans of $176,000-$275,000 in Victoria for owner-occupied
homes.
Compiled by www.interestrate.com.au using Cannex data (January 22).

© 2003 The Age

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