To fix or not to fix?

Interest rate movements have always been hard to predict and no individual is certain exactly what the future holds for the economy in the next two to three years. Removing this uncertainty is what fixed rates are all about – locking in your interest rate and locking in your loan repayments for a certain period of time.

The main reason for taking a fixed rate mortgage is it eliminates all the risk that comes with a variable rate mortgage, offering you a fixed repayment amount for a definite period of time. A fixed rate mortgage is an insurance policy against financial pressure brought on by interest rate movements, especially rapid ones that could cost you dearly.

Your mortgage is usually your largest financial obligation. Careful consideration and regular review are critical components to getting the most from your mortgage and making sure it works for you. At every review you should ask your Broker whether the loan and structure you have is working for you, whether you have achieved your financial objectives and how you can improve on those objectives.

Another option is to fix part of your loan and keep the other part of your loan variable. If you’re a good saver and want accessible offset facilities or want only partial protection against rate increases, then perhaps this is a good option for you.

There is no doubt that fixed rates have become increasingly attractive. You should, however, remain mindful of the various limitations of some fixed rate loans before you sign on the dotted line. Your Broker will be able to walk you through what limitations apply to extra payments and redraw and remember, just like the chance that rates will rise, there is a chance they will fall as well.

With fixed rates sitting at around 4.59% for a 1 year fixed rate, 4.74% for a 2 year fixed rate or 4.69% for a 3yr fixed rate, now could very well be the time to take action!

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