One of the first and biggest decisions you need to make when you’re applying for a home loan is whether you want a fixed or variable interest rate.
Your decision can depend on several factors, such as your financial goals, whether rates are predicted to rise or fall, and the purpose of your loan.
With interest rates predicted to rise by the end of the year, and the economy going through a period of change, now may be the time to consider whether you should move to a fixed home loan, or fix a proportion of your loan.
As a mortgage broker, we would be happy to talk to you about the options that align to your financial and personal objectives. Together, we can find the right solution.
A popular choice for a new loan is to lock in an interest rate for a specific period, usually no longer than five years. You can then reconsider your options. Some lenders offer longer fixed-term periods but those products often come with higher interest rates.
If you’re seeking a mix of flexibility and certainty, we can look at a split loan. These allow you to set a percentage of your loan at a fixed rate. The remaining portion will be set to the variable rate, which can fluctuate over time.
Here are some of the potential advantages of choosing a fixed-rate loan.
- With a rate that’s fixed, you know exactly how much your repayments will be over your pre-agreed timeframe.
- You’re protected from rate rises, regardless of what happens in the market
- There may be lower fees with a fixed-rate loan. Variable-rate loans can come with additional features and extras but at a cost. If you’re happy without them, you could potentially save on fees.
However, keep in mind that a fixed-rate loan often offers less flexibility than a variable-rate loan, depending on the lender. For example, you may not get as many features attached, such as an offset account, and may not be able to make additional repayments to pay off your loan faster. If these things are important to you, but you want some certainty with your repayments, a split loan may be the right choice for you.
I can lay out your options and talk you through the right solution for you.