Six key insights for borrowers thinking of fixing their rate

The decision by the RBA to cut the cash rate to a new record low of 2.5% will have many borrowers re-assessing their current mortgage and pondering whether now might be right time to fix their home loan rate.

Mortgage comparison website Mozo.com.au has compiled a list of some key insights that will help guide your thinking on this issue:

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Assuming all lenders cut rates by 25 basis points, the average variable rate for a typical $300,000 home loan will drop to 5.28% in August. 
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Even though variable rates are set to hit new lows this month, the top variable rate on the market is still likely to be at least 50 basis points higher than the lowest current fixed rate (3.99% one-year fixed rate from The Greater Building Society).
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We’d have to see two more 25 basis point cuts by the Reserve Bank before variable rates come close to matching the lowest fixed rates on offer.
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Given the widening gap between variable and fixed rates, it’s a great time to consider fixing or splitting your loan to take advantage of some of the low fixed rates on offer right now.
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However, fixing 100% of your loan may not be the best option for every borrower as it leaves you with less flexibility over your repayment and switching options. The ability to make extra repayments on fixed home loans can be limited and penalties generally apply to early loan payout.
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Splitting your loan by fixing half and keeping the other half variable allows you to take advantage of the record low fixed rates on offer right now while maintaining flexibility over the variable portion and hedging your bets on any further rate cuts.

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