Fix or float? That is the question

Many industry experts are now expecting an interest rate rise in March and further rises to follow throughout 2014. So with this in mind, people are starting to ask me ‘should I fix my home loan now?’

It’s a good question but there are several factors to consider before making the decision. As always you need to consider your personal and financial goals. If you don’t expect your housing situation to change for the next few years and are attracted to the comfort and security of unchanged loan repayments then a fixed loan could work well for you. You also may have options concerning the term of the loan. For example whether you fix for three years or five years.

Consistency and certainty can be attractive to many but a fixed loan won’t suit everyone. If you want some more flexibility in your repayments, such as making extra deposits when you available to you, then you may need the additional flexibility of a floating rate.

If you want a bit of both worlds, another option is to split your loan, which means electing to have part of your loan fixed and part at the variable rate. This may mean you can have some of the benefits security and flexibility.

Here are my top tips if you are considering fixing or re-fixing your home loan:

  • Speak to me so we can undertake a complete review of your mortgage - many banks will contact you directly however it’s important for us to look at all your options against your goals before committing or re-committing to a fixed loan
  • Consider your short, medium & long term financial & personal goals. There are plenty to weigh up including family commitments, selling and/or buying a new home, investment property or holiday home, overseas travel, purchase of holiday home, your retirement plans and employment
  • What is best for you doesn’t always mean the lowest rate. For example, if you have a family supported by one income you can fix for a longer period so you know exactly what your repayments will be whilst relying on a single income
  • Know when you can re-fix your loan – some banks offer 60 days prior where some offer only 30 days prior
  • Negotiate the re-fix fee – some banks will waive this cost and I can help you with this.