Choosing the right loan is a great start but what is the point if you lock yourself in when rates are high only to see the reserve bank cut interest rates?

By fixing when the economy is running smoothly and interest rates are cheap you will protect yourself from credit crises and volatility.

Unfortunately, most Australians fix when rates are high because they fear that rates are going to go higher!

This is not out of a rational decision to look at the overall term of the loan or what rates are likely to average over that entire period.

Remember, 3 or 5 years is a very long time!

Many people just go straight to their bank and try their best to negotiate a good rate.

Unfortunately this strategy is flawed because, unlike variable rates, the major banks and other lenders have completely different fixed rates!

Why is there so much variation? Because each lender has their own opinion about the likely direction of interest rates in the future and so price their loans with different rates.

A mortgage broker can negotiate on your behalf to get a great offer from one of the lenders on their panel.

Of those who apply for a fixed rate loan, many of them would be better off with a variable rate.

Why is it that some people are better off with variable rates?

Well, fixed rates tend to have high exit fees called ‘break fees’ or do not allow you to make large additional repayments.

A fixed loan is like a fixed contract: if you break it then it is going to cost you a small fortune!

Do not fix your rate if you are planning to:

• Sell your property,
• Make a large lump sum repayment,
• Refinance your home loan,

Flexible fixed rates (splitting the loan to be half fixed and half variable) may help if you are planning to make extra repayments but this will not help if you are selling or refinancing as you would still incur large exit fees.

Our mortgage brokers have specialised software that can quickly find and compare the cheapest fixed rate mortgages.

Please call us on 1300 889 743 or enquire online and we will complete a needs analysis, work out which lenders you qualify with and give you several options to choose from.

You may notice that the media is constantly reporting that interest rates are either going to shoot into the stratosphere or plummet down to record lows.

They regularly ask economists to make a predictions on interest rates because these articles grab the attention of most Australians.

The truth is that nobody knows what will happen with interest rates in the future, not even the Reserve Bank.

In the past, we have seen many predictions on interest rates which have turned out to be incorrect.

If you choose to fix your interest rate, then please base your decision on sound economic logic or on your own personal preferences, not media reports!

Please keep in mind that if you fix your home loan and then interest rates drop, you cannot switch back to a variable rate without paying a large exit fee.

If you apply for a fixed rate home loan and the bank changes their fixed rates between the time that you apply for the mortgage and the time that your loan is advanced, then you will get the new fixed rate.

You can pay a fee which ranges from $395 to $695 or 0.15% of the loan amount to lock in your rate at the time of application. That way you are protected from rate rises.

You cannot rate lock a pre-approval and rate lock is only available for a maximum of 90 days (depending on the lender).

The good news is that due to the high competition in the fixed rate market, there are some incredible discounts and special offers promoted by Australian banks.

In fact, some lenders occasionally run special discounts where they are giving you such a low rate that they hardly turn a profit!

Call us on 1300 889 743 or enquire online to find out what discounted fixed rates are available now!

Traditionally, fixed rate loans lack the flexibility offered by other home loan products. Paying out the loan early or switching will both cost you dearly in break fees.

However, with new products coming out in the market, some of our fixed rate loans now offer features such as:

• Extra payments without penalty
• Redraw facilities
• 100% offset facilities
• Low or no monthly account keeping fees
• Interest only repayments

It is important to remember that fixing your rate means commitment for a period beyond anybody’s prediction.

To some extent it is a gamble but at the very least fixed rate loans provide insurance against interest rate rises that might put your home at risk.

Want to get some great tax deductions this financial year?

Pre-pay your interest in advance on a fixed rate loan!

We know lenders that have the most competitive interest rates and can offer you professional discounts as well.

This loan type is suitable for property investors and those refinancing.

We recommend that you always keep your financial goals and priorities in mind when making a decision on your home loan and seek independent financial advice before fixing the rate on your home loan.

Call us on 1300 889 743 or enquire online if you would like a quote on a fixed rate home loan or if you would like to find out if fixed rates are suitable for your situation!