While there has been a rush of interest from homeowners trying to fix their mortgage rates in the wake of October’s official interest rate rise, one mortgage broker says the numbers just don’t add up.

Australia’s largest independent mortgage broker, Loan Market Group, says it has seen a 30 per cent increase in borrowers looking to switch from a variable rate to a fixed rate mortgage after the Reserve Bank lifted the official cash rate by 25 basis points to 3.25 per cent.

However, borrowers who have done the sums have opted to stick to variable rates, after realising the fixed rates being offered by the majors were still substantially higher, the broker said.

“Given where fixed rates are at the moment, we have estimated that variable rates would have to increase by around 3.0 per cent over the next two years for a fixed rate to be worth considering,” Loan Market Group chief operating officer Dean Ruston said in a statement.

Mortgage holders locking in a fixed rate at the moment would be paying around 7.5 per cent for the next three years or as much as eight per cent for five years.

“As variable rates are in the low to mid-five per cent range, it’s just not worth fixing,” he said, adding there was a massive differential between variable and fixed rates, and one that major bank lenders should justify.

Variable rates are influenced by rate decisions taken by the RBA, while fixed rates are driven by wholesale interest rate markets.

At this stage, financial markets are expecting a steady rise in the official cash rate, pricing in a rate of at least 3.75 per cent by Christmas and around 5.5 per cent by December 2010.

Sources: Lending Central, Loan Market, AAP