Should you keep your home loan or property investment loan variable? Should you look at fixed rates? Is now the right time to fix your loan? These are the top questions on everyone’s minds.

With everything going on in the media, a recent spike in conversations about inflation, rate rises and the actual state of our economy, it is definitely one of the questions our brokers receive daily these days!

Looking for the ultimate answer? No one really knows what the perfect time will be to fix your loan’s rate in.

The best economists, bankers, brokers and finance professionals… No one has a crystal ball that can predict when the next pandemic will happen, or what the impact of the Russian war might have on these.

However, there are some things you can bear in mind to make the best decision with what we do know!

1. Know how the fixed-rate cycle actually works

To start with, it is very crucial to know how the Fixed-rate loan cycle works.

Generally speaking, fixed rates predict where the variable rates are heading. Currently, fixed rates are becoming more expensive than variable rates, suggesting variable rates will be on the increase sooner than we initially expected.

Over the past 10 years, we have been living in very unusual conditions with a falling, steady interest rate market. The historically-low interest rate levels we have grown used to (1-2% for some home loans) were nothing compared to the average interest rates in Australia (6-8%), and although we knew this was not sustainable in the long-term, the time has come in which rates are rising at a pace that is unknown. 

So…

How do you navigate the current rising interest rates?

If at this point you are thinking about fixing your rate to outwit the market and predict where things are heading, we are sorry to say at this point in time you might have missed the boat.

Nonetheless, fixing your loan’s rate can still provide great advantages you will want to consider.

• Fixing your loan for budgeting purposes

One of the greatest benefits that come with fixing your loan relates to certainty.

Knowing exactly what your repayments will be, week in and week out for a specific period of time can become a great asset when it comes to staying on top of your financial responsibilities.

Budgeting becomes increasingly easy with a fixed-rate loan, providing you with the freedom to allocate your income and plan accordingly well in advance.

• Protecting your peace of mind

As we mentioned earlier, no one can truly predict what will happen with the market. The pandemic, upcoming elections, amongst plenty of other continuously changing conditions can always impact the rate of your loan becoming an important source of stress when it comes to your repayments!

Beyond securing a competitive rate, fixing your loan can be s source of protection for an invaluable asset; your wellbeing and peace of mind.

Knowing that your loan will remain unchangeable regardless of the many happenings in the market provides the benefit of stability and the ability to sleep well at night. Even when variable rates might still be sitting lower than fixed loan rates (due to the rate cycle we covered above), choosing to fix might pay dividends in the long run.

At Rise High, we understand that repayments are likely to be the highest expenses you incur. With this in mind, we also recommend that you have a look at the potential pros and cons of fixing your loan, and consider alternative options such as refinancing your existing loan, or saving money and paying down your debt sooner with debt consolidation loans. Circumstances like wanting to sell the property or needing to get out of the loan altogether might become increasingly complex if you do decide to fix, so it is definitely not a decision you wish to take lightly!

Will you be able to cope with the changing environments of the interest rates?

Preparing yourself for the upcoming rate increase does not have to be a source of concern if you understand your situation and have the support of an expert with your best interest at heart.  Although understanding the markets and finding the best solution may seem difficult at first, our team is here to guide you through all this and assess your situation in depth.

Feeling confused or struggling to decide the most suitable choice for you? Reach out to our team! We will help you work out what is best to support your financial dreams and goals.