Fixed Rate Home Loans Gaining in Popularity

2011 has seen a dramatic and unprecedented rise in the popularity of fixed interest rate home loans.

With a worsening debt crisis in Europe, and the United States slipping back into recession, headlines this year have been dominated by financial uncertainty. In the current economic climate, it appears that more and more Australians are choosing the safety and predictability of fixed interest rates on their mortgage.

Fixed rate products becoming increasingly competitive

No doubt contributing to the upswing in fixed rate home loans, a price war has broken out between the major Australian banks, with considerable discount and incentives being offered on fixed rate products.

Westpac is the latest bank to cut its fixed rate loans, by 15 or 20 basis points depending on the product. Certain fixed rate products are now up to 150 basis points cheaper than the standard variable rate of the same bank.

Yet discounts are “not expected to last”

While the fixed rate price war is potentially good news for first home buyers, analysts have warned that the cut-rate lending is not likely to persist in the long term.

With the Eurozone debt crisis becoming increasingly complex, and the threat of widespread recession looming in Europe, it is expected that the cost of borrowing will begin to rise again soon, and banks will be forced to pass this expense on to consumers.

Rate cut widely expected on November 1st

According to economists, it appears increasingly possible that the Reserve Bank of Australia could cut the official interest rate at their next meeting on Tuesday, November 1st.

The strong Australian dollar and financial drama overseas have kept interest rates steady for nearly a year. There are high hopes amongst Australian homeowners that we will see a cut in the official cash interest rate before the end of the year.