July 24, 2014
News of CBA dropping it's 5 year fixed rate from 5.69% to a new all time low of 4.99% from 24th July has caused a new surge of competition amongst Australia's banking sector, with two of the major banks matching the drop immediately, and many more due to follow suit over the next couple of days.
This once again raises the question, is now the time to fix your home loan rate?
Lenders are fighting to win new customers by allowing borrowers to lock in long term interest rates at below 5%. With new promotions from most lenders, including a credit union offering a variable rate at 4.65%, (on loans with a loan to value ratio of less than 80%, and no application or ongoing fees), as well as other lenders offering discount variable rates at 4.90% or lower, now is the perfect time to review your home loan.
For a five-year fixed loan with a balance of $400,000, the CBA's reduction lowers monthly repayments by $166 a month, according to the RateCity website.
Along with a low rate and protection from possible future rate hikes, fixing your loan brings certainty of repayments. This can make your mortgage easier to budget for over a longer period.
But it’s not all beer and skittles with a fixed rate. You won’t benefit from any rate falls that may occur during the fixed term. So you run the risk of paying higher repayments than if you’d stayed with a variable rate, but most analysts don't expect variable rates to drop much, if at all over the next 5 years.
If you're thinking of selling in the next 5 years, then a 5 year fixed will not be for you, as most lenders will charge you 'break fees' if the loan is closed before the end of the 5 years.
However, with 1, 2 and 3 year fixed rates lower than 4.99% with most lenders, it is still the perfect time to review your home loan, and start saving on your repayments.
To arrange an appointment, and start saving on your home loan, call me today on (07) 3286 7711, or visit me, David Thomas, and my team at Shop 67, Victoria Point Shopping Centre, Victoria Point.