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Rising fixed mortgage rates mean it could be time to lock in record low repayments before it is too late, say mortgage specialists and financial analysts.
A rise of just 25 basis points could mean increased interest payments of almost $120 a month for a borrower with an 80 per cent loan-to-value ratio repaying an $800,000 principal and interest mortgage over 30 years, according to Canstar, which monitors interest rates and fees. That's based on a move from 3.75 per cent to 4 per cent.
Variable rates are unlikely to fall any further, say financial analysts who add that they're more likely to rise.
"It's likely we have seen the bottom of the interest rate cycle, or are very close to it," says Shane Oliver, AMP Capital chief economist, about the direction of interest rates. "So there is a case to lock in fixed rate mortgages when their rates remain ultra low below 4 per cent."
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Marie Mortimer, managing director of loans.com.au, the nation's largest online lender, says lending costs jumped after Donald Trump's presidential victory because of an expectation he will boost government spending, lower taxes, push up inflationary pressure and cause interest rates to rise.
Mortimer also says it is not a case of when rates will rise, but by how much.
"There is no doubt that global markets – which help determine the cost of money used for mortgage products – are pricing in a rise in rates in the medium term, and that has now been aggravated by expectations of higher inflation if Trump implements his election promises," she adds.
"Fixed-rate mortgage rates look like they are already starting to rise," adds Oliver.
"If bond yields remain around current levels or go higher, I expect major bank lenders to follow [the smaller lenders] and raise their fixed mortgage rates too – and soon."
Five months ago loans.com.au reduced its three-year fixed rate by 32 basis points to a record low of 3.67 per cent. This rate has been increased to 3.89 per cent.
Other lenders such as Illawarra Credit Union are increasing one-year fixed rates by 45 basis points to 4.10 per cent.
Firstmac, Australia's biggest non-bank lender, has increased one- to three-year rates on its owner-occupier and investor rates by 13 basis points. Its owner-occupied rates are increasing to 4.09 per cent and investor rates to 4.34 per cent.
The Reserve Bank of Australia's decision to keep the cash rate on hold does not rule out lenders increasing rates, finance experts warn. The cash rate is the interest rate the RBA charges on overnight loans to commercial banks.
Martin North, principal of Digital Finance Analytics, a consultancy for banks and financial services companies, believes interest rates will begin to rise "this summer".
"Banks are caught in the draught of international movements. Their true funding costs are only indirectly linked with the cash rate," North says about lenders needing more than savers' deposits to keep their mortgage lending growing.
AMP's Oliver says there will also be pressure on variable rate mortgages but to a lesser extent.
"Coming at a time when there is already regulatory pressure on the banks (higher capital requirements and rules requiring a higher source of funding from bank deposits), this could see the banks raise their variable mortgage rates out of cycle from the RBA. But this would likely only be around 10-15 points and would probably take a few months to flow through."
He expects lenders to start raising their variable rates early next year but does not expect the RBA to raise the cash rate until 2018.
Australian property buyers typically change lenders every four years, or possibly more than six times over the life of an average loan, according to analysis of borrowing statistics.
Big borrowers with loans of more than $1 million are the most active, with an estimated six in 10 seeking to lower costs and boost disposable income by lower payments, says ING Direct.
They are also in the best position to negotiate lower rates, cheaper fees and special incentives, such as waiving some of the processing or establishment charges.
The accompanying tables show the cheapest advertised headline rates and comparison rates for fixed rates over one, three and five years.
The comparison rate takes into account some of the fees and charges on a property loan to provide a more accurate representation.
For example, headline rates for a three-year fixed loan at ING Direct and Easy Street Financial Service are both 3.59 per cent for a $800,000 loan with a loan to value ratio of 80 per cent. But Easy Street costs another 44 basis points after adding fees and charges.
Only about one in 10 lenders have application fees. These range from $300 to $1500.
Most have upfront fees of about $700, which covers services such as legal fees, settlement and administration.
Switching from a variable loan before the term ends is likely to incur an administration fee of about $300.
Switching from a fixed loan could cost thousands of dollars, which might mean it is worth holding off until the fixed term ends.
Borrowers are also advised to check what the rate loan reverts to at the end of the fixed term, as it can sometimes be higher than the lender's standard variable rate.
Regulators recommend borrowers doublecheck the term of the new loan. For example, some lenders only allow refinancing with a loan of 25 or 30 years, rather than the term left to pay off the current loan. That means repayments for the new loan will drop, but making only minimum payments means it will take another 25 to 30 years to pay off.
The sweetest rates are not published so borrowers need to use readily available online comparison sites to find the cheapest or use a mortgage broker able to find the best discount.
Lenders are also competing for business with packaged deals. For example, Commonwealth's Mortgage Advantage deal offers discounted rates on loans as well as waived loan and credit card fees. There is an annual fee of $395.
Big four lenders can also offer discounts on home, car and loan protection insurance.
Mortgage brokers, who receive commissions from lenders for transacting mortgage switches, are divided about how pressing the need is for borrowers to take action.
Mortgage Choice, an ASX-listed network of brokers, says rising fixed rates and the prospect of static variable rates means that it is a "perfect time" to consider a switch into record low fixed rates.
But Chris Foster-Ramsay, principal of mortgage broker Foster Ramsay Finance, wants to see more evidence of pressure on rates before recommending any switches.