When Falling Interest Rates Are Bad For Mortgages

Recent falls in interest rates are good news if you have a variable rate loan, but what if you’ve opted for the fixed option instead? AAP’s Stephen Johnson has crunched the numbers, and calculates that the cost of switching to a variable-rate mortgage from a fixed option is $18,000 if you have a $250,000 mortgage, because of the exit fees. In practice, that’s unlikely to be worth it, since the interest rate savings probably won’t beat the exit fees. More than 43,000 Australians signed up for fixed rate mortgages between March and August; if they did their budgets right, they should still be able to afford the repayments, but it sounds like some teeth-gnashing is the order of the day.