The Fixed Rate Conundrum
Having been a mortgage broker for 10 years now, I have seen many ups and downs in interest rates. Dealing with thousands of clients over this time has alerted me to an odd behavior that people do when it comes to fixing their loans.
I have noticed that clients only seem to fix their loans when economic times look like going bad and rates are heading north. They want to secure the cheapest interest rate, as they believe the interest rates will continue to keep going up. Now Yes that does make sense except for the fact that most only do this when the rates are already over 7.5% and higher.
Of course we have advised them much earlier that they should be doing this but many want to “roll the dice” so to speak and see what the rates actually do. By then it’s all too late. Many of them are STILL paying interest rates over 8%.
We currently have two banks that have newly released their reduced fixed rates and I presume the remainder will follow once they can secure funding at the cheaper rate.
St George have announced a 3 year fixed rate of 5.59% and CBA with a 5.79%.
Now to think about this logically, these rates are super cheap, anytime you see money below 6% you should know that the money this cheap is worth grabbing… yet we wait and “roll the dice” to see if it will get any cheaper.
For those property investors whom also have a home loan and know they will hold their property for at least the next three years, this should make their property cash flow positive by a considerable amount per week.
For those with a home loan whom live on a budget, which is almost everyone, then why wouldn’t you look at splitting your loan and locking some of it in a cheap rate?
Now since I have been a mortgage broker, the cheapest fixed rate I have ever seen was a Westpac 3 year rate at 4.99%, which was a few years ago. Westpac made this rate available for only approximately two weeks. My point being that if you want the great rates you need to act fast because everybody else is trying to get this rate too.
And even if the fixed rates come down a little further, you have still been able to secure a cheap rate well below 6%. These economic times don’t call for high risk decisions. And of course we can help here with your finance…
Food for thought…