The 3 year fixed rates vary a lot between the major four banks.
Different from variable rates, the banks change fixed rates on a nearly weekly basis.
This means banks can adjust the rates and to suit themselves without many people noticing.
The lenders aim to adjust their 3 year fixed rates so that they will earn over the time of your loan. They have to predict future rate increases or rate cuts and, fortunately for you, each lender has different opinions.
This means that one bank may offer a lower fixed rate because they believe rates will go down while another may have increase their rates estimating that rates will be higher for the next 3 years.
So if you want better rates and great savings then you need to shop around.
Fixing your rate is like betting against the bank. The bank is predicting rates to go one way and you are accepting their estimation and fixing your rate in order to defend yourself from the increases in the cash rate.
You don’t want to fix your rate for a longer term during times of market panic. At the first sign of bad economic news, banks will generally raise their fixed rates because the want to capitalise on the market hysteria.
During times when the market is stable the 3 year rates are generally lower. This is the best time to lock in your rate.
At the end of 3 years your fixed rate expires and your loan reverts to the standard variable interest rate. Typically, you will receive a letter from your bank a month before the expiration of your fixed rate including an offer for you to re-fix your rate for another 3 years.
You should always contact you broker to check if the rate you have been offered is competitive before accepting the offer.
If you chose not to re-lock the rate, the bank will generally give you the Bank Standard Variable rate (BSV). This may not be good news for you.
You should contact your mortgage broker and from there they can negotiate with your lender and secure you a discounted rate below the BSV.
The shortest time you should fix a loan for is usually 3 years. There is not much benefit of fixing your loan for 1 or 2 years.
A common reason that people choose a 3 year fixed rate over other terms is because they anticipate the financial markets to be unstable in the short term.
You can contact us on 1300 55 10 45, or enquire online, one of our specialists will get back to you to talk about your options.