Should you fix your home loan rate? With current interest rate at all-time low and attractive fixed interest home loan offered by many lenders, more and more people are considering fixing their loan. Whether to fix or part fix your home loan depends on your circumstances. Here are some things to consider to help you decide. Advantages of fixing your home loan: • Fixing your home loan guards you against interest rate hike. • You know for sure what you are repaying. This makes budgeting easier. Disadvantages of fixing your home loan: • Often extra repayments are limited with additional fees or not allowed if you have fixed rate home loan. • Fixed rate loan normally have break fees if you change of pay off the loan within the fixed rate period. • If interest rate drops you end up paying a higher rate than that of variable rate loan. You should not fix your loan if: • You plan to sell your home in near future. • You plan to refinance your home loan with other financial institution. • You know that you have saving capacity and plan to make extra repayments on your loan. • You wish to have high flexibility on your home loan. Consensus for Interest Rate for 2015: Economists remain divided on their views about interest rate for 2015. Most economists are predicting interest rate to rise in 2015 while other believes that the Reserve Bank of Australia (RBA) may cut the cash rate further in 2015. There are several reasons that could contribute to another cut in 2015: • If commodity prices continue to fall in 2015, and the world and domestic economy remains weak, the RBA may cut the cash rate in 2015. • One of RBA’s duties is to maintain price stability. To achieve this RBA has inflation target of 2-3 percent. If low oil price continues, the inflation/CPI pressure is lessened hence it is less likely for RBA to increase the cash rate. • Rising unemployment and falling household income growth may force the RBA to further cut the cash rate. Because interest rate movements have always been hard to predict, interest rate prediction should not be your main consideration to fix your loan or not. More and more lenders are now acting independently of the RBA. The last time RBA moves the rates was in July 2013. However many lenders kept reducing their rates independently of the RBA in the last 16 months as they are competing for market share. If youre happy paying the amount on a fixed rate loan, and you dont need the flexibility of making extra repayments (without additional fees) in the short term, a fixed rate loan is a reasonable option. If you would like to enquire about home loans or wish to refinance your current loan please contact us on 0450 848 995 or 0450 848 996. Alternatively you can email us on [email protected]. Wealth Alliance wishes you a Merry Christmas and Happy New Year.
Posted on: Thu, 25 Dec 2014 11:52:58 +0000
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