Another first Tuesday of the month, no change – the RBA has announced official interest rates remain at 1.5%pa. Still in the middle of the longest inaction in the history of the RBA, experts believe the bank will hold steady at least into 2019.
However, one previous bank board member has stated the case for raising the official interest rate sooner rather than later. That’s because interest rates around the world are beginning to creep up, with the US influencing this, thanks to a number of rate hikes expected this year.
While no one can accurately predict what the board will do month-to-month, at some stage, rates will go up. On top of that, several Australian lenders have indicated they will be increasing variable mortgage interest rates.
So, knowing this begs several questions: do you have a portion of your mortgage fixed? If so, is it set to expire soon? If not, is fixing a portion of your home loan right for your circumstances?
Fixed or Variable Interest Rates?
The benefit of a variable loan is obvious; when interest rates are low, your repayments are lower. When interest rates eventually begin to rise, your monthly repayments on the portion of your loan that is fixed stays firm, while the variable portion of your loan increases with each raise. This offers you certainty, which can help you plan your finances in other areas.
The cons? A fixed rate will be higher than a variable rate. You may face high exit fees if you make changes to your loan or make extra repayments during the fixed rate period. This is why experts say you should not fix more than 50% of your mortgage – the flexibility that remains in the variable portion of your loan gives you more options.
So, is fixing a portion of your loan right for you? Give us a call, we can go through your loan and your circumstances to ensure you’re getting the most from your mortgage.