So some of you may have seen that in the last week a couple of the major banks are lifting their fixed rate mortgages. This is generally a good indicator that variable rates will be on the rise in the short- medium term. That said many banks haven’t moved them and now might be the time to fix a portion of your loan with one of these lenders. What do you think? With fixed rates going up would that be enough to motivate you to fix your mortgage.
Now, as a rule the banks pay their economists a lot of money to ensure the bank doesn’t lose money on fixed rates in the longer term. So the question I am asking is are the couple of banks just changing their market position for profit now? or do they genuinely believe rates are rising?. Its hard to say. As the cost of funding for the banks pulling money out of the USA is likely to increase as rates over there are tipped to increase. Bond rates are also increasing and this will put pressure on the banks to increase their rates
to consumers.
Fixed Vs Variable – this really is the conversation that people enter with us all the time. To which we reply we don’t have the crystal ball, nor are we economists. But I like to think of fixed rates as an insurance policy. You know you will pay more for it, but it may just save you in your time of need. But please don’t fell I believe you, or everybody for that matter should fix. As there are far more variables at play then you realise. Things to consider
1) Are you planning on selling inside the the fixed period?
2) if so, is the mortgage portable? (portable is the ability to take the mortgage to you next house- though
this process is not always easy.
3) What if you wan to pay extra off, will the fixed account allow it.
4) Can I have an offset against my fixed loan? (only a couple of banks offer this)
5) Can I have part fixed and part variable with an offset account against the variable portion (simple answer is yes, but not all mortgages support split loans)
I have more questions but I think you can see that your individual answers to these questions (and more) will determine what is right for you. But if you need help figuring it out then you know where to find us.
Have a great weekend people
