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Time for a fixed rate home loan?

Time for a fixed rate home loan?

The latest research from a national mortgage broker seems to point to a change in borrower’s preferences to a fixed rate home loan versus standard variable home loans.

It seems that the long-term trend of variable interest rates could be coming to an end, with Mortgage Choice’s latest research pointing to borrowers being seemingly more open to a fixed loan – with fixed rate home loans accounting for almost 1 in 5 of all loans written in June.

The combination of wholesale funding costs for lenders, regulatory changes and tightening lending policies have all had an effect on the overall cost of borrowing and this has also led to ‘out of market cycle’ rate increases by lenders. These factors and general cautiousness from borrowers wary of future interest rate rises has led to a increase in fixed rate home loans.

So what are the advantages and pitfalls of fixing your home loan?

The main advantage of a fixed rate home loan is that it gives you certainty with your repayments over a given time. So regardless of what is happening in the economy or within the lending sector, you know what you need to pay each month.

The main disadvantages of a fixed rate home loan is that they are generally inflexible and expensive if you break the contract inside the fixed period. You also need to factor if interest rates drop, it might end up costing you comparatively more in interest than if you stayed on a variable rate.

Remember there may also be potentially fees that may apply when fixing your home loan, and you should also look at the comparison rate of products to gauge a true cost.

It’s important to carefully consider all these factors before deciding whether to fix a home loan or not.

Contact us to discuss your home loan options today.

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