In a decision that caught some by surprise yesterday, the Reserve Bank lifted interest rates by half a percent to 0.85 per cent 📈 You would have undoubtedly heard this on the radio, seen it on the news or read the announcement on Linkedin from someone in the finance industry.
So, we’re not here to tell you what you already know.
We are here to break down the rate rise and what it means for you, based on your individual financial circumstances. With the big 4 already passing on the rate in full, it’s important to know what options are available to you (i.e. refinance, fix my home loan, stay on variable etc.)
Should I fix my home loan:
- A fixed rate home loan can offer you stability for those conscious of a budget and who want to take a medium-to-long term position.
- However, fixed rate loans usually come with a few provisos. Borrowers may be restricted to maximum payments during the fixed term and can face break fees for paying off the loan early, selling the property or switching to variable interest during the fixed rate period. Also, you may not be able to leverage an offset account against a fixed rate loan.
- Borrowers should consider, and be aware, that at the end of the fixed-rate term the loan will usually ‘revert’ to a variable rate
- Most 1yr fixed rates currently are between 3.5 – 3.75% at 80% LVR with 2 and 3yr fixed rates a lot higher; however you can find marginally lower rates if you are able to consider 70% or lower LVR and a Tier 2 lender.
Should I stick with a variable rate home loan:
- A variable rate loan may come with features such as an offset account which can reduce the amount of interest you pay, a redraw facility and the ability to make additional repayments either regularly or in a lump sum.
- A variable rate loan offers flexibility if you decide to sell the property or switch to a fixed rate period down the track, however, borrowers should consider the capacity to service the loan as interest rate increase
- As most lenders pass on the current interest rate rise in full, you will find variable rates between 2.75% – 3.0% at 80% LVR; however you can find lower rates if you are able to consider 70% or lower LVR and a Tier 2 lender
What about a split loan?
- This is a great option if you want to hedge your bets. This option allows you to have some of your loan at a fixed rate and some at a variable rate. You can split your loan 50/50 or at a ratio that meets your needs.
Most lenders are offering cash bank incentives if you are looking at refinancing with another bank, so give us a call on +61 438 455 035 or visit us at www.pointerfinance.au. Contact us