Should you fix your interest rate?
There is no right or wrong answer to this questions, and many people find this decision very tough. In Perth, house prices have been rising but you can save considerable money by choosing the right interest rate for your circumstances.
As with all financial decisions, do your research. Look at your own personal situation, your income, your expenses, how long you plan to have the loan and whether you believe interest rates will rise or fall. A little bit of research into the Perth housing market can help you gain an understanding of where rates are expected to go in the short-term and long-term.
Talking with Mortgage Brokers Perth will help guide you in the right direction.
Fixed interest rate loans
A fixed interest loan is taken out for a set period of time - usually between one and five years. The interest rate is fixed for that period. At the end of that term, the loan reverts to a variable rate, or you can renegotiate a further fixed term. If you believe that interest rates are going to rise, then by locking in a rate today you can protect yourself from increasing interest payments. However, if the rates should fall you will not be able to take advantage of the savings during the agreed fixed term.
A fixed rate loan offers you security and predictable repayments. Borrowers who prefer to keep control of their finances and know exactly their monthly outgoings, are usually interested in this type of loan.
Another reason may be that you are anticipating changes to your circumstances such as changing jobs, or starting a family. In this case, you may want to ensure the security of your repayments for a set period of time.
Be aware that many fixed loans will charge early repayment fees, and breaking the loan early will attract many cancellation charges.
Variable interest rate loans.
Basic variable loans and standard variable loans offer more flexibility and savings can be high if the rates are low.
Basic variable loans also include 'no frills' version offered by the lenders. These loans usually offer the lowest rate - around 1% lower than standard variable or fixed rate. Standard variable loans come with more options such as offset, redraw and split loan capacity. Standard variable rates will be slightly higher than a basic variable, but if you intend to use the extra features then this may be the rate for you. If not, you will be paying for features that you don't need.
Not only to variable rate loans offer more flexibility, they often come with low introductory rates for an initial period, before reverting to the standard rate.
But, variable rates are sensitive to economic conditions and picking the next interest rate move can be very difficult,
Split rate home loans.
If you are really unsure over fixed or variable, then you can take out a split variable/fixed loan. Most commonly, the split would be 50/50 or 60/40. This allows you to make early repayments on part of the loan, without exposing the whole amount of the loan to rising interest rates. (Penalty rates will still apply if you quit the fixed portion of the loan
early.)
Everyone is different and with rates likely to fall again, now is the time to look closely at your options. For the latest on interest rates, call your Perth Mortgage Broker on  .
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