I have updated my main post
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If you want to be fixed, then maybe sooner is better than later, as I believe increases in fixed rates will flow through within the next two weeks. Excuse me if I state the obvious here! There are times when a fixed rate home loan can provide some certainty over a period of extra financial or emotional stress. Interest rates can move further than you expect. It may be worth considering fixing a significant part of your borrowings in the following circumstances: Many errors were made from about Jan 02 to Dec 04 with staying variable, and from about Jan 07 to June 08 with people fixing for long terms. You can see on the charts that from Jan 07 to June 08 there was not much pressure for rates to go up further. However in Jan 02 to December 04 there was significant upward pressure on rates. This indicator could have assisted many borrowers at these times, to make a better decision on whether to fix or not. There are four stages of a loan process when the rate may be locked in: Beware that sometimes there is a (rate lock) fee to lock in your fixed rate, rather than only having the rate locked in at settlement. The questions to ask if you want to take up a lenders rate lock option include the following: With some lenders there is a need to watch what happens very carefully when your fixed rate home loan completes its term. Often the loan will roll over onto the standard variable rate, and this can be much higher than what you can get as a basic variable or negotiated rate. What are break costs and early payment interest adjustment (EPIA) penalties? Break costs are fees that occur when you “break” a fixed rate loan. There is also a cost for paying off part of a fixed loan called and early payment interest adjustment (EPIA). Some lenders have in the past suggested a good way to guesstimate the break cost is to look at the difference in rate from the initial loan settlement to the date you wish to break your loan (or when you get quoted a payout figure with whatever expiry date), and multiply this by the number of years remaining in the fixed term and the loan amount. So this formula would be B=(Rb-Ri)xYxL. The IMF has increased their expectations of Australian economic growth. I think this will filter through to higher interest rates in the 2 to 4 year term. I think there will be a slowdown in about five years from now, due to the timing of the next US election – so my five year is a bit lower than my four year. |
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