RBA Announces 0.5% Drop to the Cash Rate
As the RBA changes rates again, funders are sharpening their pencil on the fixed rates too. Borrowers are no longer locked into loans anymore thanks to recent changes in credit laws that prevent deferred establishment fees on new loans. Of course there is still mortgage insurance, but that’s a different story.
Banks and Funders are enticing customers now more than ever to stay on their books as long as possible. Fixed loans have now become the new “black.” Don’t believe it? We recently had a customer who reduced their current variable rate by over 1% by electing to fix for just one year. This is especially useful for borrowers who still have deferred establishment fees and are on a high rate.
If you are in this position, request a fixed rate quote and calculate the difference between your variable and the fixed rate. Is the RBA likely to reduce rates by this amount and during the fixed rate period? If unlikely to be reduced this could be a good interest saving. No one has a crystal ball, yet the difference between variable and fixed are quite dramatic at the moment.
If you are looking to fix, a couple of things to consider. Fixing allows certainty which assists with property yields and budgets yet does hinder flexibility. Closing the account (e.g. selling or refinancing) attracts massive break costs. So make sure this event is not going to happen during the fixed term. Keep in mind with most products you have the option to hedge your bet by fixing a portion of the loan only and keeping the remainder variable. Some fixed products also allow you to pay off up to $20K.
Credit Representative 411049 of Lisa Sanders
Australian Credit Licence: 383894