Many clients are asking a very similar question – should I leave the interest rate on my home loan as a variable rate or should I be looking to fix the rate?
This is the same questions being asked in thousands of households across Australia and with rates as low as they are it is a very good question to ask.
With no recent rate cuts by the Resservce Bank there is some speculation mounting that we could be in for a rate rise in early to mid 2019.
We must keep in mind that the banks and lenders are under no obligation to pass any official rate cuts or rises to their customers and oh, how much we’d love to have a crystal ball.
The fact is we already have rates as low as they have been since the 1950’s so is now a good time to fix, well both options are very tempting.
Whether you fix some or your entire loan really depends on your individual circumstances and your plans for the future.
Here are a couple of points worth considering.
A fixed rate does commit to a course of action for at least the duration of the fixed term. A fixed rate generally means a fixed repayment and whilst some lenders will allow you to pay extra there are some restrictions as to how much.
Most lenders don’t allow you to access the redraw on your loan for the fixed portion and you can be slugged with significant fees should you wish to break a fixed rate loan before the expiration of the fixed rate period.
With most variable owner occupied rate at or around 6%, many borrowers are taking advantage of trying to pay as much as possible into their home loan. The benefit will be twofold, they are paying off their home loan more quickly and gaining equity into a very important asset.
A fixed investment loan term, sub 5.5% is becoming harder to find so again it depends on your individual circumstances about whether to stay variable of fix some of the loans you have or are currently seeking.