Fixed vs Variable interest rates!

There has never been a more important time to choose your home loan interest rate. Why? Because interest rates are on the move. And when we say on the move, we mean they are increasing.

It is no secret that most lenders have already increased their interest rates and many economists predict that this is just the start of more rate rises to follow.

So the important question then becomes, should I fix my interest rate or have it as variable?

The answer to this question varies vastly between each client, because as we say no two clients are ever the same. Here some things to consider with both options.

Fixed interest rate

• Locked into a contract for the fixed rate period you choose.

• If you break this contract you may be charged pre-payment fees and economic costs

• You are limited in the additional repayments you can make during the fixed period

• It its a great way to ensure security in your home loan repayments as they won’t change during your fixed term

• When the fixed period expires, you generally go onto the lenders standard variable interest rate which could be higher than other variable interest rates

• No redraw available

• Some lenders offer 100% offset, but this is rare

Variable interest rate

• Flexibility to make additional repayments freely with no limit or restriction

• Redraw available

• Can pay the loan out whenever you like with no penalty

• If the interest rates increase or decrease your repayment will adjust accordingly

• 100% offset available

• Greater flexibility to manager your home loan

A decision to choose an interest rate is always best made when consulting your trusted finance professional and it is good to consider your short, medium and long term goals before you enter into any home loan.