September 18, 2013
This is a hot topic with our clients, so what should you do
Lenders are fiercely competing with each other to attract and retain customers, which is great news for you. Over the past few months we have seen many lenders heavily discount their fixed rates, bringing fixed rates to their lowest level since 1959. This is encouraging many of our clients to consider fixing all or part of their home loan. It is really important to weigh up this decision carefully as fixed loans and variable loans both have pros and cons, which are based around the loan flexibility, features and costs.
Put simply, variable rate loans tend to be more flexible in nature (with features as well as the interest rate) and you can take advantage of falls in market rates. But when rates rise so to do your repayments.
Fixed rate provide peace of mind, keeping repayments stable over a fixed term. However, there may be fewer features on offer. It is important to remember that once you are locked into a fixed loan you have entered into a contract with the lender for the fixed tern, so if you move away from that loan type you may incur break costs and a switch fees. The cost involved with breaking a fixed rate term can be quite high depending on when you fixed, how long you fixed for and what the interest rate was at the time compared to where market rates sit now.
Some clients wish to hedge their bets and take advantages of the pros of each rate type often choose to split their loan amounts between fixed and variable.
When making your decision, the key is to educate yourself as much as possible by researching your options, taking into considerations the wide range of loans and lenders available.
So if you would like more information on the matter or are considering purchasing refinancing your loan, or please feel free to contact me on 5444 6007