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Fixed rates; is it time?

It is an interesting time indeed in the property market and home loans, especially at fixed rates. This might be a good time to check your home loan or investment property loan to see if fixed rates are the way to go to pay off your loans faster and become debt-free.

By looking at the market as a whole, it can be seen that the official cash rate was left unchanged in 2021. Although the RBA had previously asserted that interest rates will stay unchanged until 2024, it seems to have changed its stance. An increase in rates is predicted for late 2023, as long as inflation goes no higher than 2.5% until the end of 2023.

Interest rates are clearly set to rise sooner than previously predicted and it is worth noting what some of the banks are doing right now.

Some banks have increased their fixed interest rates multiple times from January 2022. as of today, the 2 years fixed interest rate for a home loan starts from 3.49% compared to 1.89% a year ago.
In hindsight, one can see that fixed rates act as an indicator of where the banks predict longer-term rates will ultimately stop, and by the looks of it, they are on the move.

You may next ponder whether interest rates can still go down. Well, some lenders have reduced variable rates in the battle for market share. But with the cash rate at 0.10%, you’d have to be overly optimistic to expect any significant rate reduction. So, the short answer is yes, but by very little.

If you do go down the road of fixed interest rates, there are some limitations you need to take into consideration. If you are someone who prefers to pay extra into the loan whenever possible, beware that some institutions may limit this for the fixed loan period, or you may lose the interest saving benefit of your offset account.

Now that you have read the above information, you may be wondering what to do.
Well, it depends on your circumstances. If you are someone looking for repayment certainty for a fixed period, now is the ideal time to consider a fixed interest rate loan. After all, they are at historically low levels. But all indicators suggest that the next swing will be upwards, and it may come quite soon. So, it’s best to review your options in a prompt manner.

Being in the industry for nearly 7 years, Sally Pietersz – Mortgage Broker, Rands Financial Services has seen all waves in the market. Contact us today for a free consultation and the Right Solution is at your fingertips.

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