Should I Fix My Home Loan?
The buzz around home loans at the moment is “interest rates.” For several months interest rates have been low. Very low. Home buyers have enjoyed reductions in repayments, more affordable housing and boosts to some grants and concessions. But, is the bubble about to burst? Well, recently several banks lifted rates for its fixed mortgages. But many experts believe it’s still cheaper to carry on with a variable rate for the considerable future. Others are of the opinion that now is the best time to lock in your rate.
Fixing your mortgage interest rate simply means that you fix the rate you pay for set period of time. You have the safety of knowing that while official interest rates might go up and down, you'll be safely locked into a fixed interest rate mortgage, with regular mortgage payments. But you also cannot take advantages of any savings if rates fall like you would on a variable rate. There are pro’s and con’s like any loan, so we aim to make it all simpler for you to understand.
How long can I fix my rate for?
Typically, the rate is fixed for anything from one year to five years, although this can vary from lender to lender. Usually the longer the fixed term is the higher the rate, but this is usually very small in difference.
How do I know if I should fix?
Fixing might be good for those seeking repayment certainty, but it’s difficult to pick the best time to fix. Interest rates usually move on a cycle. This means that they may rise gradually, and fall gradually, then rise again etc. So if rates look like they are on the rise, now could be the time to fix. If rates are being cut however, you may be better of on a variable rate loan, where you can take advantage of the savings. Talk to your mortgage broker about what it best for you. What rates will I pay on a fixed home loan?
Interest rates for fixed home loans are usually on a par with the current variable rate but will get higher the longer you fix the rate. If rates are low anyway or are on the way down, then it may not make sense to fix your rate. But if you think that rates will rise in the near future, then setting your rate now could save you thousands in the long run.
What about a split home loan?
Some people worry that choosing a fixed mortgage means they might miss out on any interest rate cuts that might happen in the future. If this sounds like you, then perhaps a split-loan might be right for you. Usually, the split would be 50/50 or 60/40. This allows you to make early repayments on part of the loan, without exposing the whole amount of the loan to rising interest rates. (Penalty rates will still apply if you quit the fixed portion of the loan early.)
We all need different loans, and with rates remaining steady for some time, now is the time to look closely at your options. For the latest on interest rates, call your Local Mortgage Broker on
.