The major banks have hiked their standard variable mortgage rates without any official move from the Reserve Bank.

The
banks blame the higher cost of funding caused by the US subprime
mortgage crisis. With no sign of trouble easing overseas, and the
strong possibility of an official rate rise by the RBA in the coming
months, is it time to hedge your bets?

A survey by
the Mortgage and Finance Association of Australia and BankWest found
one in three people looking to borrow or refinance their home in the
next six months would select a fixed rate.

But MFAA
chief executive Phil Naylor says rates are not the only things
borrowers should be considering. "It is really important to look at the
level of service you are getting on your home loan, the fee package and
the terms and conditions of the loan,'' he says. Fixed rates aren't as
attractive (compared to basic variable rates) as they were prior to the
onset of the credit crunch, nor are they as flexible. "If you take a
(fixed) loan for three years and after two years you sell the house or
you want to refinance, there will be a cost associated with closing
that loan due to the contractual agreement that you have with the
bank,'' Cannex analyst Harry Senlitonga says. "You don't have that with
a variable rate loan.''

But with almost 40 per cent of
those surveyed by the MFAA saying they would be uncomfortable or very
uncomfortable with another 0.25 rate rise, fixing all or part of your
loan gives you the certainty of knowing exactly what it's going to
cost.

And speaking of costs - while some borrowers
may want to vote with their feet after the rate hikes and take their
business elsewhere, watch out for exit, application and fees that can
run into the thousands of dollars. "It is important when researching a
loan to consider all of these things in combination,'' Mr Naylor says.
"It is no good having a low rate home loan if the fees are too high.
Make sure you are comparing oranges and oranges.'' Also don't be afraid
to ask your current lender for a better deal. "Your existing lender
might do as much as they can to try and keep you - and I think that's
even more likely now because the lenders have all got different rates
in the market place,'' Mr Naylor says.

Standard variable rate rises:



ANZ: 0.20% to 8.77%



St George: 0.20% to 8.77%



Westpac: 0.15% to 8.72%



NAB: 0.12% to 8.69%



CBA: 0.10% to 8.67%