Fixed or Variable?
As sure as the sun rises in the morning, at some point soon, the Reserve Bank of Australia will increase the cash rate, and all lenders will immediately increase their variable rates. So, do you fix your rate/s now or hold out?
My best recommendation is not to take advice from friends or others with loans, as their situation is likely different from yours. You should research and seek information from professionals, including your accountant, financial planner or Mortgage Broker and read articles from Reserve Bank Governor Phillip Lowe.
Then determine what is important to you, such as:
- Fix the rate which gives you some certainty for a fixed period
- Stay at variable with the flexibility of extra payments and no penalties for early payout
- Take a combination of both to continue to take advantage of your Offset account
- Are your goals short term or long term, or a combination
- Is the “revert rate” after the fixed-rate important to you
- Check the “comparison rate”, which is a true indication of the real cost of your loan.
- Ask your Mortgage Broker to use their resources to provide you with comparisons between your current lender and potential new lenders
- What costs are involved in switching, including a possible “rate lock fee”
- What are the refinancing costs and the annual $ benefit if you refinance and restructure
So make sure you have prioritised what the most important considerations for you are and discuss them with your Mortgage Broker or finance professional.
Darrel Roberts is the Head of Mortgage Lending Services at Inspired Money and with over 30 years of experience in mortgage lending and accounting he is an expert in his field.