I think this will lead to a fall in the interest rates of fixed loans, or will mean no increase in what is being offered for a while. I still think variable rates will go up another half a percent in the next four months.
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I think that the market will start to factor in more rate rises very quickly. So don’t sit on your hands if you want to be fixed. However if you plan to fix just to save money, my predictions suggest you will end up about square on a three year fixed. And behind for the rest. 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. I wish I had a crystal ball, as it is possible that the US could respond to their problems in 2012 by printing money to “inflate” out of trouble. However I believe that the US still has plenty of borrowing power left and will not need to go down this path (The UK and Japan may be another matter). Well – the usual situation is that nobody guesses what will happen . . . 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). |
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