To fix or not to fix that is the question?

With speculation as to where interest rates could be heading, many borrowers may be considering the option of fixing all, or part, of their home loan. However, there are various aspects to consider prior to making the decision.

If the fixed rate is lower than the basic variable rate it makes the decision to fix much easier. But if the fixed rate happens to be higher than the basic variable rate, then moving to a fixed rate requires further consideration.

Many lenders will charge a fee to change from the variable rate loan to a fixed rate loan and there could also be other charges, especially if the fixed rate loan is paid off prior to the fixed term. These ‘break cost’ charges can be quite substantial.

There are features such as offset or redraw facilities or the ability to make unlimited additional payments without penalty which comes with a variable product. These may not necessarily apply to a fixed rate product.

Another consideration could be whether the property is owner occupied or an investment. A mortgage professional can do the necessary evaluation of a borrower’s individual circumstances and help to make the decision on whether to fix or not to fix.