It’s the question on every homeowner’s lips at the moment – to fix or not to fix?
With fixed-rate offers (as at 19/05/2020) starting from around 2.09 per cent, these are hands down the lowest interest rates Australia has ever seen. Some lenders are even offering rates for under 3 per cent for up to five years.
As an experienced mortgage broker, North Brisbane Home Loans CEO Pat Cranshaw believes now is a good time to take action.
“The RBA’s current rate is .25%. You can get a good variable rate anywhere from 2.70-2.90% currently. But fixed rates start from 2.09% and sit around an average 2.29% for say a 3 yr period.
So my thinking is IF the RBA were to drop to 0% say… and the banks passed on the full rate cut – this would take variable rates down to say 2.45%.
But fixed rates at 2.09% at 2.29% are lower already than this. The variable rate may not get there.
For me – I would be looking at a split loan to take advantage of lowest rates in history for an amount and then some on variable that you can make extra payments to or add an offset account to. The splits are determined once we chat about your situation and have a plan/strategy around this”
To help you, even more, we’ve put together a list of pros and cons on moving to a fixed rate home loan.
Pro: Peace of mind
If you like to know how your home loan will look for a few years into the future then fixing will definitely appeal to you.
Securing a repayment amount can help you have a clear idea of your budget going forward.
Pro: Protection against future rate rises
By locking in a fixed rate, you can protect yourself from rate rises in the future.
While the Reserve Bank of Australia says that these rates may remain stable for some time, it’s unknown what this actual timeframe looks like in reality.
Con: Inform yourself of the reverting interest rate (what the fixed rate will go to when it expires!)
Once your fixed period comes to an end it’s important to inform yourself about what rate your home loan will revert to.
Often. Lenders will have a much higher reverting rate than will actually apply – especially with a broker on your side to ensure that a pricing application is completed to make sure you are looked after when it comes off.
Your mortgage broker can discuss this with you, so you have no surprises at the end of the fixed period.
Con: Reduced flexibility
Most fixed-term home loans restrict the ability to make extra repayments, which might be important to you.
If this doesn’t appeal to you, a great solution is to look at splitting your home loan and fix only a portion of it.
Splitting your home loan
These options may give you the best of both worlds.
Most banks and lenders will allow you to split your loan so that you can pick up some of the pros and cons of both loan options.
While this may sound complex, it can be relatively simple and a great point to discuss with your mortgage broker.
If we still haven’t convinced you, give us a call at North Brisbane Home Loans and we’ll see what else we can do for you. All you have to do is ask.
Patrick Cranshaw, a Certified Mortgage Professional for over 21 years, founded North Brisbane Home Loans in 2002. His career began with ANZ Bank in New Zealand, where he progressed over 16 years to a Business Banking role in Virginia. After moving to Brisbane in 2000, Patrick led the QLD market for a home loan agency, helped set up the REMAX Real Estate Finance division, and practiced as a broker.
