Is it time to ‘fix’ some of your loan?
Even though the Reserve Bank has maintained official interest rates at 1.5%pa for many months, lenders are slowly increasing interest rates charged on home loans. Is it time to switch to a fixed rate home loan?
Have interest rates in Australia gone as low as they are going to go?
Many economists expect the Federal Reserve in America to raise their benchmark interest rates due to positive economic times. Decisions in the US generally affect Australia and will often result in rate rises here. Primarily that is because Australian banks rely on the international capital markets to source their funding.
Should you fix your home loan rates now?
Home owners and property investors often ask if and when they should ‘fix’ the interest rate on their loans.
There are many pros and cons of fixed vs variable rates. With fixed rates, you know what your repayments are over a set period of time. If you fix the rates on your loan for say, three years, over that period you can set your loan repayments and budget accordingly. Many property investors see this as a benefit because they can plan their cashflow according to the rent they receive. It’s important to understand however that if you fix your rate and your circumstances change, you may pay hefty break costs to pay off or modify your fixed loan.
Variable rates on the other hand, are generally lower, but can change without much notice. Variable rate loans also offer the flexibility to make additional repayments.
Competitive fixed rate home loans now on offer
Generally, variable rates are higher than fixed rates, but recently some lenders are offering more competitive fixed rate home loans. So now may be a time to review your rates to see if a fixed rate loan would suit you.
Milestone’s mortgage broker, Jake says that your loan strategy really depends on your circumstances. “If you have an investment property loan, fixing some of your loan may give you certainty over your repayments in the coming years”. However, he cautions on fixing the rates for home owners. “The banks are really cracking down on lending for investment properties, but owner occupier loan rates are still really competitive”, Jake says.
As with all things financial, whether you fix your loan rates or not depends on your situation, so we strongly recommend you seek advice from Jake or your Milestone adviser. Get in touch with the Milestone Lending team today on (02) 6176 3110.
Click here for more information about Milestone Lending and our how we can help you with a home loan.
