The RBA Board has decided to keep official interest rates on hold at the record low 0.10%pa. Their decision comes as we witness the largest one-month jump in house values in 17 years and a surge in new home loans.
While this indicates the Australian economy is recovering sharply, it has prompted warnings the Reserve Bank may need to soon reassess record-low interest rates.
While no one can accurately predict when this will happen, it begs the question: do you have a portion of your mortgage fixed?
Fixed vs variable interest rates?
The main advantage of a variable interest rate is this: when interest rates are low, your monthly repayments are low. That’s a win!
But, when interest rates eventually begin to rise, your monthly repayments will increase. That’s food for thought.
With a fixed loan, your repayments stay firm. This offers you certainty, which can help you plan your finances in other areas.
Best of both worlds
It’s unlikely that you would want your entire mortgage fixed – you can actually fix a portion of your mortgage – experts recommend you should not fix more than 50%. Then, the variable portion of your loan gives you more flexibility.
Another reason you wouldn’t want to fix your entire loan is you may also face high exit fees if you make changes to your loan or make extra repayments during the fixed rate period.
Where does your loan stand? If you’re not sure you’re getting the best out of your mortgage, give us a call, we can go through your loan and your circumstances.