Australian interest rates are tipped to hit a record-low by winter - and analysts say this makes fixed-rate home loans a good idea again.
The popularity of fixed-rate loans collapsed last year as the Reserve Bank of Australia slashed rates aggressively.
This left some families paying interest rates
of more than 9 per cent while others on variable rates saw their mortgages drop.
But fixed mortgages are now seen as possible insurance against a surprise rise in rates.
Aussie Home Loans founder and executive chairman John Symond says the overnight cash rate will hit 2 per cent by mid-2009, down from the present 45-year low of 3.25 per cent.
"I do believe the cash rate will get down to 2 per cent within the next three to four months," Symond said.
The official cash rate has not approached this level since 1959.
With interest rates on home loans now also at four-decade lows, Symond said fixed-rate borrowing was starting to look like a good option again.
"My feeling is if you can lock in a fixed rate within half a per cent of record lows, you've done very well."
A senior analyst with financial products researcher Canstar Cannex, Harry Senlitonga, said there was no guarantee interest rates would not rise again unexpectedly, which made fixed-rate mortgages a compelling choice. "It's a big question mark with interest rates: in three years anything can happen."
Macquarie Group interest rates strategist Rory Robertson said interest rates were likely to hit 2 per cent.
But he thinks this will happen later in the year because he believes the RBA will cut rates by smaller margins than it has recently.
Debt futures markets see interest rates falling to 3 per cent by March, which would be the lowest cash rate since early 1960.
With fixed-rate loans holding a record-low share of the mortgage market, lenders are offering cheaper mortgage rates to entice borrowers away from the lowest standard variable mortgage rates since the 1960s. St George is offering a fixed-rate mortgage rate of 5.64 per cent, set for three years.
- AAP
