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When Should you Make the Switch? Fixed vs Variable Mortgage Rates - February 2022

By Guest Blogger, Louisa Sanghera, Principal Broker,

Zippy Financial


If you have a mortgage and you haven’t taken a look at the interest rate you’re paying in the last 12 months, I have great news for you. There’s a good chance you could save some money.

This is because banks are offering really competitive variable interest rates at the moment, to attract new business.

You can have a variable or fixed rate home loan (and if you don’t know which type you have, you’re not alone; around 1 in 5 mortgage holders don’t know whether they have a fixed or variable rate, according to recent research).

A fixed interest rate is a rate that is locked in for a set period of time (usually 1 to 5 years), and a variable rate loan can change at the lender’s discretion.

Over the last few months, we’ve seen fixed interest rates start to creep up. For instance, a major bank on our panel increased their rates in late November last year from 1.98% for 3 years, to 2.59% for 3 years – a jump of 0.6%.

While fixed rates are going up, many variable rate home loan offers are staying low.

Which means now is the ideal time to monitor the mortgage market, to make sure you can get the best home loan for you, saving as much money as possible along the way.

So how do you do this?

First things first: Don’t “set and forget”
The worst thing you can do is take out a mortgage and then file it away in a “do not disturb” file.

This is actually what banks want you to do. They want you to set and forget, and just keep paying your mortgage on time each month. They don’t want you to shop around for a more competitive loan, a cheaper interest rate or a cashback deal that puts savings back in your bank balance.

No, they want to hold onto you as a customer for as long as possible. So, they love it when you “set and forget”!

By shopping around, you might find:
• A home loan interest rate that is lower than you’re currently paying
• A different type of home loan that offers peace of mind, with a low locked-in fixed rate for a few years
• A cashback offer that gives you $1000, $2000 or more in instant cash (lenders offer this as an incentive to win your business)

How can you find the best loan for you?
It’s all good and well to know that it’s worthwhile shopping around, but you might next be wondering if fixed or variable rates are the best way to go? ABS figures from late last year show that almost half of borrowers are choosing to lock in a fixed interest rate, with the other 55% choosing a variable rate home loan.
So right now, people are fairly evenly split between choosing one type of loan or the other.
When deciding which type of home loan suits best, I always advise my clients to think of their loan term financial situation. We are likely to see mortgage interest rates rise throughout 2022 and into 2023.
Would you prefer to lock in a fixed rate now, even though it could be a little higher than you’ll pay in a variable rate, so you can lock in repayment security?  Or are you happy to pay a lower variable rate for now, so you save money in the short term, enabling you to build up some savings for if and when interest rates do increase?
There’s also a way to hedge your bets by getting a split loan, with part of it fixed and part of it variable (you can decide the exact split). This can be a good way to manage the risks of paying too much, while locking in a bit of repayment certainty.

If you’d like some help in working out the best next step for you, including an update on which banks are offering the best deals and cashback offers right now, contact a Mortgage Broker today.

Contact us today on 1300 855 022 or visit www.zippyfinancial.com.au

Louisa Sanghera - Director and Principal Award-Winning mortgage broker at Zippy Financial

Zippy Financial

Louisa created Zippy Financial after a 25-year career in banking, with the goal of using her expert financial knowledge, vision for exceptional customer service and passion for property to help her clients grow their wealth through smart property financing. Whether you are looking to buy your first home, re-finance or build your property investment portfolio, Louisa and her team of experienced brokers can help guide you through the challenging maze of finding & securing exactly the right loan for you.

M: 0414083522 or 1300 855 022
E: louisa@zippyfinancial.com.au

Connect with Louisa Sanghera on LinkedIn



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