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INSIGHTS WITH EVALESCO

When do we think is the best time to fix your loan, and why?
by Kristi Teasel | 28 July 2021

TOPICS DISCUSSED

Our reasons behind raising rates
Variable rates will be impacted at some point
Fix your loan while we have low interest rates

Interest rates change frequently, they rise and fall. Banks set interest rates to respond to market conditions by raising or lowering interest rates and lending conditions to stimulate or dampen market activity and balance growth with risk tolerances.

Whilst homeowners have enjoyed record low interest rates for some time, the burning question that lingers for many borrowers is, “When and why should I fix my home loan interest rate?”

In recent times we have started to see movement with banks raising rates, specifically fixed rates.

The reason for that is that the RBA (Reserve Bank of Australia) has provided what is known as term funding to the banks as a result of the pandemic and subsequent economic conditions. This was a way for the government to support the banking industry by effectively lending them money, in the billions of dollars, at a rate of 0.1 percent. This facility has ended as of June 2021 and now the banks will have to return to traditional funding methods to raise capital to lend out to borrowers. In practice, they must pay more to investors, or depositors, to have the capital to lend. This causes interest rates to fluctuate, as we have recently seen.

The changes we are witnessing will have an immediate impact on fixed rates, as terms must be locked in. Variable rates will be impacted at some point as banks examine the mix of fixed and variable rates, as well as the impact of the pandemic and economic conditions on investors and residential borrowers. Variable interest rates are more influenced by the RBA, and as the economy recovers and employment levels return to pre-pandemic levels, borrowers will see the impact on variable interest rates.

As a result, right now, it is a great time to look at fixing your loan while we have these low interest rates. You may consider fixing all or part of the loan depending on your Individual circumstances, strategy and goals.

Locking in a good rate may appear to be a daunting task, but with the assistance of an expert, like the Evalesco team, the process can be relatively simple. So, when it feels right, act!

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Kristi Teasel
MORTGAGE BROKER
kristi@evalesco.com.au | 02 9232 6800

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“Should I pay more off my mortgage or put more money into super?”

One thing to consider is the interest rate on your home loan in comparison to the rate of return on your super fund. Before making a decision, it’s also important to weigh up your stage in life, particularly your age and your appetite for risk. Whatever strategy you choose you’ll need to regularly review your options if you’re making regular voluntary super contributions or extra mortgage repayments. As bank interest rates move and markets fluctuate, the strategy you choose today may be different from the one that is right for you in the future

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