A Fix Over Interest Rates
A recent report from Bill Evans gave predictions for interest rates for 2014.
Westpac Economics revised its forecast on interest rate movements, expecting the RBA (Reserve Bank Australia) to reduce rates in February 2014 rather than November of last year. With a second 25-basis-point cut predicted in May 2014, the official cash rate could reduce to 2 per cent.
The RBA’s cash rate is currently at a record low of 2.5 per cent after it made quarter of a percentage point cuts in May and August.
So deciding to fix or stay on a variable rate is always a personal decision, however depending on what the RBA do tomorrow (Thursday 4/2/14), we may have a clearer picture to help us make our decision.
The real question is whether rates will increase this year, and if they do, will that kickstart the increase cycle?
Deciding to fix part or your entire loan is never an easy choice. Much of your decision will be based on your own personal financial position. It depends on many elements, not just RBA rates, but the deals the lenders and mortgage brokers will offer you personally at any particular time.
The key is to understand what will make you feel comfortable. The security of knowing what your loan repayments will be for a set period of time or the chance of lower rates reducing your repayments.
Again, it really comes down to your own personal financial position, what makes you sleep and night and your own images of what the future might look like.
At Helpcompare, we thought to help you with the process of comparing what choice you might like to take, the following pros and cons could be useful:
Move to a Fixed Rate:
- If you know you will not sell up/pay off within the fixed period
- If you feel confident rates are close to the bottom of the cycle
- If you can obtain a competitive rate with no fees, beyond the unavoidable penalties
- You can live with yourself if rates drop during the fixed period
- Your life circumstances are in need of certainly
- If you believe interest rates will fall in the short term
- If deals are not attractive and set much higher than what interest rate you are paying
- Your life conditions may change in the near term, which may require you to pay off or make a large deposit to your loan, so the need for flexibility is paramount
What ever your decision, getting an annual financial health check each year is advisable.
Like the weather the lending market is hot with options. Thus, each year doing a comparison on what is available in the market to compare rates, lending capacity, fees, flexibility and many other options is highly recommended.
The other great news is, in Australia we have the benefit of mortgage brokers, who can help you compare the right deal for your needs. And these days all mortgage brokers have to be licensed and follow strict guidelines controlled by ASIC so you have real peace of mind on the professional service you will receive.
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