Hi Sharnee,

While chasing the lowest % rate could seem tempting (especially after all those rate rises), you need to consider the bigger picture.

Like all things home loans, the move you make will ultimately depend on your personal circumstances, financial goals, and what’s happening in the current market.

Yes, fixed rates do have their merits. And knowing exactly what your repayments will be for a set period of time is important in some situations.

But...that certainty *usually* comes at a cost – like the ability to have an offset account, make extra repayments, redraw, negotiate or refinance without major break costs.

Here are a few factors to consider:

👉 The interest rate outlook

While we can’t predict the future, here’s what we do know...

Now that fixed rates are sitting below variable rates (on average, for new owner-occupier loans), this is the market predicting that variable rates could start coming down in the medium term. So, if variable rates were to start dropping during your fixed term, you may not end up ahead financially.

👉 Your budget and financial goals

What are your long term financial goals? A fixed rate loan means your monthly repayments will remain the same for the fixed term, making it easier to plan your finances. Hello certainty!

👉 Your need for flexibility

Fixed rate loans often have limited flexibility.

So, if you anticipate selling your property or making large lump sum repayments soon, a variable rate loan might be a better option as it usually offers features like redraw facilities, plus the ability to make extra repayments or refinance without penalties.

Also – you don’t exclusively need to choose between variable or fixed. You also have the option of splitting your loan (e.g. 60% variable, 40% fixed).

That’s a fair bit to take in, but by speaking to an expert, you’ll be able to clearly understand what your options look like.

I'm happy to have a chat if you'd like to dive deeper.

Cheers,

David

David Stephensen
Finspo Home Loan Expert