Cancel Fixed Rate
If you have a fixed rate home loan, you may be wondering if you can get a better deal, now that interest rates are falling. While you may be able to find a lower rate, the exit fees associated with breaking your contract may outweigh any benefits.
More than 40,000 unlucky people fixed their mortgage in March of this year, when the highest fixed interest rates in a decade were crippling many home owners. Now these borrowers are denied the savings other home owners are enjoying due to recent rate cuts.
In September, the official cash rate was 7.25% and average home loans were nearly at 10% leading many to fix their loan fearing more rate rises. However, September brought a 0.25% rate cut, then October and December saw a huge 1% rate cut, with November seeing a 0.75% rate cut. Home loan interest rates have on the whole fallen along with the cash rate, falling from around 9.65% to 6.80% with some lenders.
Now borrowers looking to refinance face a difficult choice: continue to pay a higher interest rate, or incur thousands of dollars in penalty fees for breaking their fixed contract.
Usually borrowers who cancel their loan within the fixed period are charged an upfront fee, and are also forced to pay to compensate their lender for the "economic cost" of breaking their contract. This is the difference between the interest the borrower would have paid the lender and the prevailing interest rate. As interest rates fall, this gap is becoming ever wider, meaning it may already be too late for fixed borrowers to save by refinancing.
If you are thinking about refinancing, talk to Your Local Mortgage Broker to find out if it is a good option for you and how much you could save. You can call  to find your nearest mortgage broker.
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