A foot in both camps with split-rate home loans

Interest rates should stay low for the foreseeable future but trying to predict where they’ll go in the medium to long term is hard. 

For people that want the certainty and protection from rate increases but also want to stay in the game in case rates fall further, a split rate home loan could be an option.

At Mortgage Choice, more than 80 per cent of their loans written across the country in February had a variable rate so there’s no doubting their popularity right now.

But split rate loans allow borrowers to fix the rate on a portion of the loan while leaving the rest variable.

Michelle Hutchison is a money expert at Finder.com.au and told Property Observer she wouldn’t be surprised to see an increase in borrowers opting for split rate home loans given the uncertainty about the future direction of interest rates.

“The Finder.com.au Reserve Bank Survey shows mixed results with which direction the cash rate will move this year,” she said.

“Another indicator is that most lenders have not followed every cash rate movement throughout this downward cycle over the past three and a half years.”

“Borrowers may not know which option is better so hedging your bets and splitting your loan with part fixed and part variable divides the risk. 

As its name suggests, the split loan combines the features of a fixed and variable rate loan. The variable part will let you be flexible and ride the wave of any further rate cuts while typically being able to make extra repayments or redraw from the mortgage.

The fixed part of the loan usually has more restrictions but it locks in the interest rate protecting you from increases.

While borrowers often split their loans 50-50 between fixed and variable, most lenders will allow customers to choose their own combination. 

Furthermore, many lenders will allow borrowers to split rates using their existing mortgage without having to refinance.

Call Perry Finance now to discuss the options available when it comes to split rate home loans for you.


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