A fixed rate mortgage allows borrowers to know exactly what their repayments will be each month, and provide protection over any rises in interest rates.
A fixed rate mortgage allows borrowers to know exactly what their repayments will be each month, and provide protection over any rises in interest rates. The loan has a fixed interest rate, usually for a term between one to five years and this rate stays the same regardless of whether interest rates set by the Reserve Bank of Australia rise or fall. Once the term of the loan comes to an end, you can choose to fix for a further period, or simply revert to a variable rate mortgage. Customers can fix either part of the loan or the whole amount of the loan.
An obvious problem with a fixed interest rate is locking in a competitive rate. Last year, thousands of home owners locked in a fixed rate, as interest rates were going up and up and up. In an effort to protect themselves against more rate hikes, homeowners rushed to fix their rate. But many are now tied into a home loan rate of around 9.6 per cent while the variable rate has fallen to around 5.6 per cent. Also, some fixed rate mortgages do not offer much flexibility and you will probably have to pay a fee should you wish to leave the fixed term before it expires. Usually fixed mortgages do not have many added features, such as early repayments, although there are some fixed-rate home loan products that now offer more options as the market becomes increasingly competitive.
However, fixed rate home loans certainly have their place. If you can fix your rate before rates start to climb then you will be in a good position. As a rule of thumb, it is best to fix at the bottom, or near the bottom of an interest rate cycle before rates start rising again.
Knowing how much your repayments are each month is another bonus, especially for first home buyers who may need some time to adjust to the new expense, or home owners who simply just want that security.
The best strategy for anyone thinking about fixing their home loan rate, is to talk to an expert. A good mortgage broker will know the market, understand what rates are available on the market and can look at your personal situation to assess what loan would be suitable for you. This gives you the peace of mind you deserve when choosing a home loan. Getting the right loan and the right rate is crucial to your investment, and a mortgage is big investment so make sure you get the right advice first.
Our mortgage brokers are exceptional at matching the right home loan to each client. We offer the ultimate service in home loans, comparing our panel of lenders and researching the best home loan for you. If you are ready to consider a fixed rate mortgage, then we are ready to help you make that choice.
Call us today on 1300 787 665 or submit our on line form. We have local mortgage brokers ready to assist you choose a great fixed home loan.