Home Loan Options Cut Rate Rise Sting

Sun Herald

Sunday August 6, 2000

By DAVID POTTS, Business Editor

HOME lenders will raise their rates this week, but if you're quick you'll find some fixed-term bargains that could save you more than 0.5 per cent in interest a year.

HomeSide Lending is offering two and three-year fixed mortgages at 7.55pc well below the new variable rate of 8.07pc.

Even better is Suncorp Metway's 7.5pc for three years which, incidentally is below its two-year rate of 7.75pc.

John Symond, managing director of one of the biggest home lenders, Aussie Home Loans, said there had been a 20pc increase in the number of telephone call inquiries about fixed interest rates.

``Every time interest rates rise, the fear emerges that interest rates will double and get out of hand," Mr Symond said.

``Our suggestion is that if you are worried, split the loan into half fixed, half variable."

Commonwealth Bank, which will apply the 0.25pc rate rise from Friday, said it was leaving its fixed rates unchanged even though they were below the new variable rate of 8.07pc.

National Australia Bank has also raised rates and other lenders are expected to follow suit this week, adding $25 a month to a $150,000 mortgage.

By leaving its fixed rates below the variable rate, Commonwealth is hinting that it thinks rates have peaked.

Andrew Willink of independent rate experts Cannex said the other option was to increase repayments so you pay the mortgage off faster.

``If you can fix at a rate that is the same or below the variable rate it is a win/win," Mr Willink said.

``There's still a chance rates will move up further."

A fixed/variable cocktail hedges your bets and removes future rate shocks if they go up and still leaves you laughing should they fall. The catch, however, is no single lender simultaneously offers the best variable and fixed-rate deals, though Illawarra Mutual comes close, especially if you include the 12-month honeymoon rate of 5.8pc.

A three-way split of a variable rate of 7.8pc (soon to rise 0.25pc), a 5.8pc honeymoon rate and a 7.65pc two or three-year fixed rate would be cheaper than just taking out a variable rate loan from a bank.

Maroubra couple Nicole and Steve Abbott considered fixing their mortgage but opted instead for Wizard's relatively cheap 7.44pc variable rate.

Even after the 0.25pc rate rise they're better off than if they'd fixed.

Mortgage House managing director Ken Sayer said increasing repayments from monthly to fortnightly or weekly ``works a lot better than any gimmick".

© 2000 Sun Herald

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