Julie from Pimpama has asked a question…
[blockquote]”My residential loan is currently variable and with talk of interest rates still to go down, should I leave it the way it is or lock some in to a fixed loan, there are some really attractive rates at present in the market, and how long should I fix it for?”[/blockquote]
Great question Julie, many people like yourself are in a very similar circumstance. Currently most economics forecasts are for rates to stay stable at least until the end of the year with the possibility into early next year. The economy is starting to show some signs that it is improving and rates may change later next year.
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What many people do is split the total amount of borrowings between fixed and variable. The fixed portion is designed to protect for any major rate increases and the variable portion remains so to be able to have 100% offset facility to reduce the amount of interest accruing on the variable portion with the ability to make extra or large sum repayments if the opportunity arises.
A little bit like “hedging your bets”. People generally fix 50% into variable and the other 50% into fixed. Although its dependent upon your own personal circumstances (e.g. is the property owner occupied, an investment property, how long you plan to keep the property for, do you plan to buy more property, what economic factors are currently expected and what they are medium term – ie over the next 3 – 5 years).
A lot of people have been choosing a 3 year rate to fix a portion of their loan on. What’s really important with whatever you decide on, is that you speak to your Bank or Mortgage Broker prior to making any firm decisions and let them to do some basic calculations for you. They do this free of charge, however there may be some charges to make the changes to your loan/s if you decide to do this, and its important to understand what those costs might be.
All lenders are looking to retain their clients business and there are many lenders to keen to have your business, so don’t be frightened to negotiate any costs that you are quoted as I am sure your request will be duly considered.