I have previously written about the pro’s and cons of fixed rate home loans (Refer my blog “To fix or not to fix” of 29/3/17). Rates are now on the move with several lenders including Suncorp, AMP, Macquarie Bank, Pepper, ING Direct, ME Bank, Bank of Queensland & IMB recently increasing their variable rates in response to soaring funding costs overseas. It is inevitable that other lenders including the big four banks will follow suit.
What can you do? I would be giving serious consideration to switching a portion or all of your loan across to a fixed rate. There are many specials out there right now including a rate of 3.72%pa fixed for 2 years, a 3 year rate of 3.79%pa and a 5 year rate of 3.98%pa. Bear in mind that whilst fixed rates offer peace of mind and budget certainty, offset and redraw are usually not available. In addition, a penalty may apply for any prepayments made during the fixed rate term. Amount of that penalty depends on the size of the prepayment, the extent to which interest rates have moved and in which direction and how long the fixed rate term has to run. Splitting your loan so that you have part fixed and part variable gives you the best of both worlds with the variable rate portion giving you access to redraw and 100% offset plus no penalty for prepayments.
I implore you to contact us first so we can assess your needs before you take the plunge.