Traditionally, Australia hasn’t been one to adopt fixed term rates primarily due to our rather uncompetitive rates, which have made long term fixed cost periods incredibly rare. However, with the success seen in overseas markets such as the US where 20 to 30 year deals are the norm, opinion in the home lending world is slowly shifting.
There are undoubtedly dangers to ‘fixing’ your home loan rate, but if timed correctly it can reap enormous benefits. Andrew Winter from Selling Houses Australia says he has always been an advocate of fixing rates because it means affordability.
You base your budget on your current earnings. If it is for an investment, you may think that if you encounter financial hardship, the rental value right now will cover the costs (those costs are not going to change that rental value), and will provide you with a back up.
Going with a fixed term cost may be the best option for people wanting to play it safe and know their costs long term.
It’s the one thing that will remain constant in a volatile market that fluctuates indiscriminately.
With the shorter fixed term periods, you focus on whether right now would be a good time, or whether it would be better to wait, whereas with home-buyers fixing for a decade, they would be more concerned with long-term affordability for their personal circumstances.
So when is the right time to consider a fixed term rate? Just as in the UK, where a growing market has made 10 year fixed rate periods viable, when Australia’s market starts to open up, competition will inevitably force better rates and that will be your opportunity.
If you’re still unsure about whether fixed home loan rates are right for you, please don’t hesitate to get in touch with the team here at Fortis Accounting Partners. You can reach us on 02 9267 0108, or via info@exemplary-financial.flywheelsites.com.
