‘I paid $5,000 for my controversial choice to cut interest rates and I don’t regret it’

At the end of 2017, I bought a one-bedroom apartment with my now-husband and fixed the interest rate for three years at 3.99%. In due course, interest rates came down.

But despite the loss of numbers, it was still the right decision for us. Rising interest rates have caused widespread budget pressure among Australian homeowners in recent years.

Some borrowers have seen their repayments double over the past few years, with the Reserve Bank of Australia (RBA) closely monitoring inflation. provided little relief in the way of interest rate cuts.

The only way to protect yourself against rising rates is for those with fixed rate loans.

Fixing your interest rate means that you know exactly what your payments will be for the period you have fixed, regardless of whether your interest rate goes up or down.

Should I fix my mortgage? The importance of authenticity

Our decision to fix the interest rate was a matter of certainty.

We were both first time mortgage holders.

I was still in the process of getting my Australian citizenship.

We both made less than $50,000 a year and had a flexible schedule from week to week.

Certainly the fees were more important to us at the time than the potential savings that would come from lowering fees.

Over the three-year fixed period, we probably ended up paying about $5,000 more in interest than we would have had the much lower levels in 2019 and 2020, when the fixed rates were and two percent.

However, we still have no regrets.

While the 3.99 percent fix is ​​a far cry from the 5.79 percent available in 2024, the certainty still has value for some borrowers in certain situations.

‘Banks want to win’: Warning when interest rates will fall

Credit broker and founder of The Money Lounge, Maddie Walton, said Yahoo Finance that fixed rates were becoming “tempting” for borrowers.

“[Fixed rates] add stability to people’s lives by having the certainty of payments within two years,” said Walton

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“This helps with budgeting and is a great option for families or people who are struggling with different payments at the moment.”

However, Walton warned that rates are still expected to decrease and that banks “want to win” when it comes to interest rates.

He explained that while banks may offer a fixed rate of less than half a percent, he suggested that they expect the variable rate to be lower for at least half of the set period.

Rational and logical: How to make financial decisions

Morgan Housel, author of The Psychology of Money, explained the difference between rational financial decisions and rational financial decisions in his book.

Logical decisions are those that make mathematical sense.

What makes sense is what balances what makes math sense, and what helps you sleep at night.

Fixing our interest rate was a logical decision.

It cost us thousands, but it was a price we were willing to pay.

Ultimately, the decision to fix or not fix all depends on your circumstances and your ability to tolerate interest rate volatility.

“If you have a mortgage right now and you’ve made your current payments this year, we’re going to get to the bottom line and we’re going to get a break soon,” Walton added.

He urged these borrowers to consider their ability to “take advantage of the reduction in their interest rates next year.”

When do the big four banks think interest rates will fall?

CBA is the only bank in the Big Four that predicts an interest rate cut in 2024.

Westpac and ANZ have pushed back the first interest rate cut until February 2025, while NAB has penciled in May 2025 for an interest rate release.

CBA, ANZ and NAB recently cut their interest rates, which some experts say is a sign that the RBA may cut interest rates in the near future.

Rates have increased by $1,562 a month on the average mortgage of $600,000 since the Reserve Bank of Australia (RBA) began rate hikes in May 2022.