Thinking about fixing interest rates? Here are the key considerations.

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RBA rate movements and fixed rates are highly topical at the moment due to the low rates being offered across all the banks. I won’t quote rates specifically as there are too to many variations available. But as a guide / range for discussion only, Principal and Interest (P&I) home loan fixed rates range between 2.09% for 1-3 years and 1.99% for 4 years at the moment. Note this is a general guide only and rates differ between all banks.
 
Some key points:

  • The RBA has dropped the cash rate to 0.10%, however the majority of the banks have not reduced the variable rate by the corresponding 0.15%.

  • As many of you will know, I’m generally not a fan of anything that locks you down or inhibits your flexibility. However, fixed rates are at an all-time low and if you want to lock away a portion of your loans on a fixed rate, now might be the time to consider doing this. Note this is not a recommendation, just an observation that fixed rates are very low right now.

  • But as always, fixed rates are NOT right for everyone and before you decide to look at fixed rates the key points I always want people to know are these:

    1. Fixed rates mean that you will be locked into using that bank for the term of the fixed rate period.

    2. If you need to / want to break the loan at any time throughout the fixed rate period then fixed rate break fees will / may apply. Nb these can be very expensive and you cannot calculate these break fees until the time you want to break a fixed rate loan which means it’s very opaque.

    3. In most cases, you cannot offset cash against a fixed rate loan either. It's not ideal to have a fixed rate loan and spare money sitting to the side, not working for you.

    4. Economists are predicting that rates will remain stable for the next 6-12 months but we can't predict what the future will hold and at the moment banks have not dropped their variable rates. However increasing pressure and competition may see the variable base rates reducing in the coming months too. At the moment all Banks are rushing to try and lock down customers at the moment, which is likely to fuel increased competition going forward (in my view).

As always if you want to discuss your options, or do a health check on current rates, please let me know and we can arrange a finance review.