One in four looking to split their home loan between fixed and variable: Loan Market

More than one in four borrowers are now considering splitting their home loan between fixed and variable, according to Loan Market.

The mortgage broking group says that over the past four weeks  27% of enquiries have been from borrowers wanting to split a portion of their loan between fixed and variable.

This is a 70% increase on the number of borrowers looking to split their home loan a year ago.

Borrowers are looking to take advantage of historically low fixed rates with all the major banks offering a fixed rate product below 5% while said the average standard variable rate across the lenders on its website in February was 5.97%.

Last month, the Commonwealth Bank’s general manager for home loans, Clive van Horen, told Property Observer there was a growing proportion of borrowers who are “hedging their bets" by splitting their loan and keeping part of it on a variable rate.

“That way they get the best of both worlds,” van Horen said.

Loan Market spokesperson Paul Smith says split loans are particularly popular with young buyers getting into the property market.

“The fixed potion of these loans gives borrowers certainty around their repayments and the variable portion allows flexibility to pay off their home loan quicker whenever they're comfortable doing so”, he said.

“With fixed rates at near historic lows and likely not to drop too much further, many customers who would have traditionally gone with variable rates are opting for the fixed route to avoid the fear of missing out when rates eventually go back up."

One Loan Market borrower, who took out a home loan for $450,000 split their loan in the following way:  $400,000 fixed for two years at 4.99% and $50,000 Variable at 5.50% for three years.

“The split gives them peace of mind that the bulk of their repayments will be the same for the term of the loan, during which they will only pay the minimum level.

“The smaller variable portion means they won’t be severely affected by rate movements but do have the ability to pay off their home loan quicker,” explains Loan Market.

“Most fixed loans minimise the ability to make additional repayments but with a variable loan split, the borrower can use features like an offset account and has the ability to make extra repayments as they see fit.”

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer


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