Should you fix your home loan now?

Mortgage refinancing is a popular option for many homeowners in Australia. It involves switching from one mortgage to another, either to get a better interest rate or to access equity in your home. But should you fix your home loan now?

The answer to this question depends on your individual circumstances and goals. To help you decide, it’s important to understand the pros and cons of fixed rate vs variable rate mortgages in Australia.

Fixed Rate Mortgages

Fixed rate mortgages are a popular choice for many homeowners in Australia. With a fixed rate mortgage, your interest rate is locked in for a set period of time, usually between one and five years. This means that your repayments will remain the same for the duration of the fixed rate period, regardless of any changes in the market.

The main advantage of a fixed rate mortgage is that it provides certainty and stability. You know exactly what your repayments will be, so you can budget accordingly. It also protects you from any potential interest rate rises, which could otherwise increase your repayments.

However, there are some drawbacks to fixed rate mortgages. Firstly, they tend to have higher interest rates than variable rate mortgages. This means that you may end up paying more in interest over the life of the loan. Secondly, if interest rates fall, you won’t benefit from the lower rates.

Variable Rate Mortgages

Variable rate mortgages are the most common type of mortgage in Australia. With a variable rate mortgage, your interest rate can go up or down depending on the market. This means that your repayments can also change over time.

The main advantage of a variable rate mortgage is that it can be cheaper than a fixed rate mortgage. If interest rates fall, you’ll benefit from the lower rates. This can save you money in the long run.

However, there are some drawbacks to variable rate mortgages. Firstly, your repayments can go up as well as down, so you may end up paying more than you expected. Secondly, if interest rates rise, you’ll be hit with higher repayments.

Questions to Ask Yourself

Before deciding whether to fix your home loan now, it’s important to ask yourself the following questions:

• How long do I plan to stay in my home?

• How much can I afford to pay in repayments?

• How much risk am I willing to take?

• What are the current interest rates?

• What are the fees associated with refinancing?

• What are the benefits of fixing my loan?

• What are the risks of fixing my loan?

Whether you should fix your home loan now depends on your individual circumstances and goals. It’s important to weigh up the pros and cons of fixed rate vs variable rate mortgages in Australia, and to ask yourself the questions outlined above. If you've got any questions at all though please don't hesitate to get in touch. We'd love to help!