To fix or not to fix?
09 March 2017
It's fair to say that over the past twelve months, one of the only certainties across the globe has been uncertainty.
In sport, the Cronulla Sharks won their first ever premiership, and the Western Bulldogs took the flag for the first time in 62 years. In politics, the world experienced Brexit and the election of Donald Trump, and in the economic environment the official RBA cash rate stooped to an historical low, while commodity prices plummeted before staging a comeback.
At a time of such unpredictability, it has never been more important to get your finances under control, and for many, this means creating certainty around income and expenses. For savers, this might mean putting money into a term deposit, while for borrowers, it could mean fixing lending interest rates.
This is particularly relevant for many first home buyers. A recent study revealed fixed mortgage rates have increasingly become a favourable option for first home buyers, more so than any other borrower. The findings also found first home buyers who are yet to fix their rates, are the most likely to do so in the next twelve months, and almost half say they would fix for three years.
While it's not surprising first home buyers are opting for fixed rates given the certainty it provides it could also be something for other borrowers to consider.
Interest rates remain at near-record lows and while many lenders have recently increased rates, it's still possible to secure a great fixed term. It's important to remember though that you need to consider more than just the rate, and take into account the loan features that fit your requirements.
If you need a redraw facility, offset account, or want the freedom to make additional payments, or payout early, fixing all of your loan may not be the right option. Often an early repayment fee is charged, so consideration of what proportion to fix is very important.
However, if you're after peace of mind, certainty around repayments, and are happy with the features a fixed rate offers, it might be time to talk to your bank manager to discuss whether to fix some or all of your home loan.
A fixed rate may not be able to help you predict this years' premiers, but it can certainly assist in helping you get your finances under control, and give you piece of mind.
About Suncorp: Suncorp Group includes leading general insurance, banking, life insurance and superannuation brands in Australia and New Zealand. The Group has 14,500 employees and relationships with nine million customers. Suncorp Group Limited is a Top 20 ASX-listed company with $94 billion in assets. Suncorp Bank is Australia’s leading regional bank servicing more than one million personal, SME and agribusiness customers