My Home Loan has been on a fixed interest rate since I obtained it nearly 2yrs ago. This is due to expire in August and I need to decide to either remain on fixed or go to variable?

Hi Glenn.

Deciding whether to remain fixed or variable, should ultimately fall in line with 2 major points of consideration.

First how long you intend to keep the asset. Don't fix for period longer than you intend to keep it, especially if you intend to sell soon.

Second but more importantly is determining if a fixed rate benefits your mortgage strategy over the same period. Fixing part or all may provide benefit in affordability on a fixed or limited income. While at the same time could be potentially limiting if you have the ability or desire to paid down you mortgage much faster.

It would be beneficial to sit with a broker who has a strong understanding of budgeting strategies and ability to implement a mortgage plan.

Happy to discuss if you don't have someone suitable.

Cheers

Casey

Hi Glenn, there is no simple answer as it depends firstly on if you plan on making any substantial changes in the next two years as that could be a reason to go variable. That being said you need to wait till closer to august to make any decisions as current offers could change by then... however currently the 3yr fixed rates through a lot of lenders are far superior in offering to variable. regards Ariel

Hi Glen

Now is a good time to review your lender and product. Now is also a good time to refix, with historically low rates. However, you need to ensure that the term is long enough to make it beneficial, but not too long that takes away your flexibility. If you decide to, or need to break the fixed rate eg bankruptcy, divorce, loss of job, need to upgrade/downgrade home, etc then you will likely have to pay break costs. Depending on loan amount and when in the fixed term you break the loan, these costs could be substantial. Especially, if the differential from market rate below fixed rate is substantial (unlikely in the current market). People fix both for a good rate but more so for certainty of loan repayment. If you want to sit on the fence you could do a combo loan ie some fixed, some variable. Regardless of which way rates move, you will win on one loan type even is you lose on the other. Hedging your bets so to speak. Happy to help you out if you require further assistance.

I don't think you'd lose out if you stayed variable as the cash rate set by the Reserve Bank isn't going up anytime soon in my opinion...the only disclaimer would be that banks borrowing costs are rising and may adjust their rates independent to Reserve Bank. It's also about flexibility, don't fix in for 3 years if you need to sell, refinance or adjust your loan as you will surely lose out!

Hi Glenn - whatever you decide fixed or variable it is important to get a broker to negotiate on your behalf with your current lender don't accept the advertised rates with the main lenders as you can negotiate with most of them. Re deciding fixed or variable you may be a bit early and need to decide closer to the time eg a month beforehand. I hope this info helps.

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