The recent Reserve Bank increases to interest rates naturally create anxiety for those with home and investment loans. For quite some time, interest rates have been at unprecedented lows due to the Global Financial Crisis and the need to stimulate the economy. Inevitably, however, they must return to more natural levels. The last two rate rises, although relatively small, have added about $90 per month to the average $300,000 mortgage. Almost certainly there will be more to come but speculating on where it will stop would be fruitless. Therefore, the idea of transferring your mortgage to a fixed rate is tempting.
Stop to consider
Before making the change it is worth noting that banks and financial institutions must offer rates that are competitive in the market. At the same time however, they need to be confident that the rates they offer (particularly fixed rates) will be commercially sound. At the time of writing, the average standard home loan rate was less than 5.8% whilst the average 3 year fixed rate was around 7.5%. There is a significant difference between the two and interest rates will need to rise considerably for the gap to be breached.
As we have seen clearly over the last couple of years, nothing is certain when trying to predict economic movements and interest rates. However, there are ways of making sure you have the flexibility you require to face the changes. For some home owners, the certainty of a fixed rate and fixed repayments can be a real comfort. Alternatively, a combination of part variable and part fixed might be the best solution for many. Others will prefer to remain with their whole mortgage at variable rates.
No matter if you are a first home buyer, thinking about refinancing or looking for property investment, various products and options are available. Saward Dawson can assist you with a range of mortgage/borrowing products including basic loans with competitive fees, packaged home loans that can be designed to meet your needs, lines of credit loans and investment loans. We would be pleased to help you get the right solution for your borrowing needs.