Interest Rates, Fixed Loans & What to Watch Next

Are Rate Cuts Behind Us?

While many borrowers have been hoping for further rate relief, Paul was realistic about the current signals. “The time for rates dropping is probably now in the rear-vision mirror,” he explained, pointing out that banks tend to move ahead of official RBA decisions. That doesn’t mean panic stations just yet, but it does mean borrowers should stay informed and prepared rather than assuming rates will fall again soon.

Should You Be Looking at Fixed Rates?

Fixed rates haven’t been a popular recommendation in recent years, largely because variable rates offered better value. “It’s been quite a while since we’ve been recommending fixed rates,” Paul admitted. “They just haven’t stacked up against the low variable rates we’ve had.” That said, fixing may suit some borrowers depending on their risk tolerance and expectations. As Paul put it: “If you think rates are going to keep increasing, which we don’t know yet, fixing could be a strategy you entertain. But it could also just be a storm in a teacup.”

A Split Loan Could Be the Middle Ground

For borrowers feeling uneasy, Paul suggested a balanced approach. “You can always look at fixing 50 per cent of your loan and keeping the rest variable,” he said. This can offer some certainty while still keeping flexibility, particularly important given the restrictions that come with fixed loans.

The Catch with Fixed Loans

Fixed rates come with conditions that don’t suit every strategy. “You’re locked in for a period,” Paul explained. “You’re limited in how much extra you can repay, usually around five thousand dollars a year.” So if your plan involves paying your loan down quickly, or you’re expecting lump sums in the near future, a fully fixed loan may actually work against you. “With a variable loan, you can pay in as much as you like, unrestricted,” Paul added.

What the February RBA Decision Could Mean

When asked for a prediction ahead of the February 3rd RBA meeting, Paul was cautious. “I don’t really think there’s enough data yet,” he said. However, he did note that any rate increase would likely reshape the property market. Higher rates could push some buyers out, easing competition and freeing up stock for those better positioned.

Focus on What You Can Control

Rather than trying to time the market perfectly, Paul stressed the importance of managing personal finances. “It all circles back to limiting your exposure, credit cards, personal loans, car loans, and maximising your cash and income so you can maximise your borrowing power.”

Want to Review Your Loan Strategy?

With rates shifting and uncertainty ahead, now’s a smart time to review your loan structure and risk exposure. BrokerCo can help you assess your options, model different scenarios, and choose a strategy that suits your goals, not just today, but for the years ahead.