Fixed Rate Mortgage
Fixed rate mortgages are popular when rates are rising, but when rates fall, you may not be better off.
Interest rates in Australia have been high for some time, but recently official interest rates were cut leading to several reductions by most lenders to home loan interest rates. Potential home buyers are anxious to know what the future holds for interest rates. Should you fix your rate or choose a variable rate mortgage?
Fixed Rate Home Loans
Choosing to fix your rate when rates are high, or set to rise is a great idea. It protects you from rising mortgage repayments, and allows you to relax knowing your repayments stay the same regardless of what happens to the financial markets. You can fix your rate for a period of time, usually between one year and five years. If you are worried about money and don't have room in your budget for small interest rate rises, then fixing your rate can give you peace of mind and security.
Risks and interest rates
However, should rates fall, you will not be able to take advantage of the potential savings until your fixed term ends. There are usually costly exit fees to pay should you want to break out of the fixed term.
The rate on a fixed mortgage is usually a little higher than the rates on variable mortgages. So if you think that rates will fall, it may not be worth paying the slightly higher rate. But, if rates do rise in the future, that slightly higher interest rate wont seem so bad after all.
As with all financial decisions, it is always best to talk to an expert. At Your Local Finance, our mortgage advisors are experienced and trained to the highest level. For the best advice on your home loan, call us on  .
|
Find a mortgage broker
Home Loan Research
|
|