Is now the time to fix your home loan?
With fixed rate loans nearing 30% and climbing, it’s obvious many Australians are looking to future-proof their mortgages by locking in their rates. The vexing question for most borrowers is precisely when to fix rates.
Continual cash rate rises, coupled with all-too-frequent wholesale money market fluctuations are swaying borrowers towards fixing their rates but timing is crucial if any long-term benefits are to be gained. The bottom line is that all situations are different. If you are stretched to the limit and can’t possibly cope with another rate rise, it may be an option to fix. However, we may well be at the top of the rate rise cycle now and it’s very likely rates will come down at some stage of the fixed period - leaving you locked into higher repayments.
Breakages must be paid for
Rate certainty also comes at a cost if your circumstances change and you have to sell before the fixed contract is up. You may well be liable to pay a hefty break cost which can be a nasty surprise to those who believed they were doing the right thing by their finances.
A break cost can be charged when a fixed loan is exited before the full term and leaves the lender with a loss which will be passed on to the borrower. The lender incurs a loss if the wholesale money rates fall after the loan was originally fixed. A break cost can be thousands of dollars but unfortunately, there is no fool-proof method of calculating this cost, as many other factors are taken into consideration, not the least the wholesale money market which is very volatile and changes virtually on an hourly basis. It really is a case of weighing up your options within your own individual situation before deciding the best way to manage your home loan going forward.
How do I compare home loans loans?
RateCity.com.au is the best website to shop for all home loans, as well as most other financial products. At RateCity.com.au, you can use expert comparative data from CANSTAR CANNEX, Australia’s leading financial research and ratings firm. CANSTAR CANNEX has analysed and evaluated hundreds of financial products to award five stars to only the very best. The CANSTAR CANNEX star ratings go much further than just looking at interest rates. They also take into account important features so you can be confident you are getting the best product.
Use our easy search tools to compare home loans at RateCity.com.au.
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