Is now a good time to fix your mortgage?
With RBA cutting down the cash rate to the lowest it has ever been, many are wondering if now is a good time to fix their home loan rate.
Australians have been watching interest rates drop throughout the course of the year, leaving many people wondering if now is the best time to get a fixed rate, or if they should stick it out for a little longer to see interest rates continue to fall. While it’s impossible to predict the future, keeping a few things in mind will help make the decision easier:
1. Make sure you understand the difference between fixed and variable rates
A fixed-rate will have the same rate of interest for the entirety of the loan, or for an agreed-upon fixed-rate period. Variable rates fluctuate over time with the market. A variable rate may mean you end up paying more if the rates rise, but can have you paying less for the same reason. A fixed rate will mean a predictable payment amount, will keep you safe from rising interest rates, but may mean you miss out on potential savings if rates drop.
2. Consider the benefits and downsides of each option
A variable rate may be better for you if
– you plan on refinancing
– you’re intending to sell your property
– you’re expecting to make significant extra repayments
A fixed rate is more likely to be in your best interest if
– you prefer certainty in your repayment amount
– you’re expecting interest rates to rise or to stay as they are
– you’re not planning on refinancing or selling your home
3. Be clear about how long you want to fix your rate for
Most fixed rates are only for a specific period, and become variable after the fixed rate ends. Doing your research about the current market and predictions for the future can help you determine how long you should set your fixed period for. It’s important to consider that once your fixed rate ends it is possible to refinance and enter a new fixed rate period.
Speaking with a mortgage broker can help you figure out which option is best for you and your financial situation.
