When
interest rates are on the rise, it's common for borrowers to panic and goes
about fixing their loans in an attempt to avoid skyrocketing repayments.
The problem
is, that they've often left their charge too late and missed out on the best
deals.
Fixed rates
started rising at the end of 2021 and now they seem to have already most future
rate rises built in, so when you do the sums, it becomes clear that a fixed
rate will generally cost you more in interest than a variable one over the life
of your loan.
Then there
are the often high exit fees you'll be forced to pay should you decide to
refinance or terminate your loan prior to the end of the fixed-rate period.
Again, it
all comes back to how much flexibility you want or need.
Get it right
A
fixed-rate mortgage can be beneficial if you prefer the certainty of knowing
what your monthly repayments will be.
This can be
true for home buyers as well as investors, with the latter sometimes wanting to
ensure they can cover any out-of-pocket expenses on their investment without the risk of rising rates pushing their mortgage repayments beyond what they can reasonably afford.
But if you
need flexibility or want to take advantage of the best going rate, you should
carefully assess whether fixing your loan is the best scenario for your
requirements.
And
importantly, will it really save you money in the long run?
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Jason Gwerder
Wednesday, 17 August 2022
