November 19, 2013
Fixed rate loans offer some fantastic features. They give you the security of knowing what your repayments will be. Some also offer lower interest rates than variable rate loans in the current market. However they do have some limiting features. For example, many fixed rate loan products limit the extent to which you can repay extra during the fixed rate term (ie- the first 3 or 5 years). Fixed rates are also subject to break fees, if you choose to end or alter your loan contract during the fixed rate term.
If you are unsure of whether fixing is the right option for you, consider the following. How important is cashflow to you? If having more of your income freed up to spend on day to day expenses is most important, a fixed rate loan might suit. Is paying off the loan as quickly as possible important to you? If you so, you might be better suited to a variable rate loan which allows you to contribute unlimited extra repayments and lump sums. If you are unsure, call us for a discussion of your personal situation and the options available to you.
Many observers of the financial market believe that we have reached the bottom of the interest rate cycle, and indeed, several major lenders have upped their fixed rates this month after many months of rate-cutting.
If you are thinking of fixing, make your move now. The best time to fix is before rates start climbing again.