If you have been keeping an eye on the news, you may have seen that several of Australia’s lenders have recently trimmed the interest on their fixed rate products.
As a result, more home buyers are looking to fix their mortgage.
According to recent data from Mortgage Choice, more than 26 per cent of all home loans written in November were fixed rate home loans.
But what is a fixed rate mortgage and is it the right option for you?
Fixed interest rate home loans have both benefits and drawbacks when compared with variable rate home loans. There are many aspects to consider when deciding whether to fix your interest rate for a pre-defined period, or allow the marketplace to determine the interest rate for you.
Fixed rate loans allow you the benefit of knowing what your repayments are for a set period without fear of the effect of interest rate increases. As such, a fixed rate loan can make it easier for you to budget for repayments because the amount is the same each month.
At the end of the loan term, most fixed rate loans can either be refixed, or revert to the lender’s standard variable rate loan.
But while certainty around repayments is certainly a positive when it comes to fixed rate home loans, it is important to note that fixed rate loans are generally less flexible than variable rate mortgages.
Some fixed rate products won’t allow you to make additional repayments and may charge you a fee if you wish to swap to a variable rate during the agreed fixed rate period.
So, if you are looking for the security that comes with a fixed rate product, but the flexibility of a variable rate product, it may be worth considering fixing part of your mortgage.
By fixing part of your mortgage, you can literally have the best of both worlds – the repayment certainty that comes with a fixed rate product and the flexibility that comes with a variable rate product.
For further information, and to put yourself in the best position with valuable information and guidance, contact a trusted consultant from Mortgage Choice on 07 3286 7711.