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Gen Z wants split-rate mortgages, Boomers want fixed rates

The generational gap is evident in new research by Finder, which shows a new level of employment uncertainty is influencing how younger generations would prefer to structure their home loans.

Out of 1000 Australians surveyed on how they would structure their mortgage if they were to refinance, 20 per cent would choose a split mortgage, dividing their loan into fixed and variable portions.

Roughly 19 per cent would refinance to a variable loan, while 17 per cent would prefer to lock in their rate for a set period of time with a fixed-rate mortgage. The remaining 43 per cent said they were unsure if they’d opt for fixed or variable.

The results reveal a number of interesting generational trends. After a lifetime of enjoying steady employment, Baby Boomers were more likely to refinance to a fixed rate (19 per cent).

Conversely, over a quarter of Generation Z (27 per cent) would split their mortgage – the highest number of any generation – while 23 per cent of Millennials would opt for a variable loan.

“With the cash rate set to remain at 0.25 per cent for some time, it’s unlikely the big banks will lower their standard variable mortgage rates any further for now,” Graham Cooke, insights manager at Finder, said.

“This means fixed-rate loans are back in vogue. For some homeowners, locking in their rate for a year or more may offer greater savings than a variable rate would.

“We’re currently seeing rock-bottom rates across the board with fixed rates as low as 1.95 per cent from Easystreet, and the lowest variable rate even lower at 1.89 per cent from Reduce Home Loans,” he said.

“There can be hefty financial penalties for breaking a fixed-rate loan early,” Mr Cooke explains, “so make sure this is something you’re prepared to commit for that 1-5 year period. Otherwise, a split loan or variable loan may be your safest bet.”

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