Does my bank have the cheapest 3 year fixed rate?
The four major banks vary significantly in the pricing of their 3 year fixed rates.
Unlike variable rates, fixed rates are chopped and changed by the banks on an almost weekly basis, allowing them to play all sorts of games without many people noticing.
Please call us on 1300 889 743 or enquire online and one of our mortgage brokers will contact you to let you know whether you’re really getting a good deal.
Not all lenders are equal
Lenders try to price their 3 year fixed rates so that they will make money over the term of your loan. That means that they have to estimate the likely future rate increases or rate cuts. The great news is that every lender has a different opinion!
The end result is that one bank may offer reduced fixed rates because they believe rates will fall while another may have higher rates expecting rates in be higher of the next 3 years.
The end result is that shopping around for your 3 year fixed rate home loan will save you plenty of money!
Who wins? The bank or me?
When you fix your interest rate you are in effect betting against the bank. The bank is estimating rates to take one direction and you are accepting their prediction and locking the rate in usually to protect yourself from the Reserve Bank increasing the cash rate.
You need to really look out for fixing your rate for a longer term at times of market hysteria! Banks tend to increase their fixed rates rapidly at the first sign of bad economic news. They are trying to make more money off of the market panic.
So the best time to fix is actually when the market is steady, as 3 year rates tend to be lower.
What happens after the fixed rate period?
After 3 years your fixed rate will expire and your loan will revert to the prevailing variable interest rate. Generally, the bank will mail you a letter a month before the expiry of your fixed rate and offer you the chance to re-lock your rate in for another 3 years.
This is a good time to contact your mortgage broker to make sure that the rate you are being offered is competitive.
If you don’t re-fix the rate then the bank will usually put you on the Bank Standard Variable rate (BSV) and hope that you don’t notice!
Talk to your mortgage broker and they will negotiate with the lender on your behalf to make sure that they give you a discount below the BSV.
Is a 3 year term suitable for me?
3 years is usually the shortest amount of time that we recommend our customers to fix a loan for. 2 or 1 year fixed rates have very little benefit because of the short term.
Most people that have a 3 year fixed rate have chosen 3 years over other terms because of expected short term volatility in the financial markets.
How do I apply for a 3 year fixed rate loan?
Please call us on 1300 889 743 or enquire online and one of our mortgage brokers will contact you to discuss your options.