Where to Start when your fixed term ends soon
Over the next few months thousands of home loan owners will be coming off very competitive fixed rate terms.
The sharpest new business variable rates currently are over 5% so there’s an increase of at least 3%.
On the average loan of $500,000 this increase in interest charges as high as $15,000 every year.
The RBA reports are not optimistic about home loan rates coming down any time soon either. For at least 12 -18 months if your fixed term ends soon, you will need a plan.
Should I Fix or Should I stay Variable?
Traditionally the variable rate has always been .20-.30% lower than fixed terms.
Some customers like to know what they are up for, paying more for peace of mind.
Things are very different in the current climate. Fixed rates are lower than the variable.
Longer fixed term can be an indicator that the RBA rates will come down somewhere in the next two years. This means lenders are wanting to capture customers for longer.
The variable rates are quite high currently but the forecast will be that they will eventually come down.
Overall, no-one is still quite sure about how long this will all take. If your fixed term ends soon then there are still some things you can do early on to prepare:
Call your lender for a rate review
I just called my lender this week for a rate review as my variable rate was over 6%.
They were able to give me .65% off my rate right there and then without me having to re-apply or sign any paperwork.
On our investment loan alone that’s a saving of almost $4,000 in interest per year.
Work out your options
The next thing I’ll do is contact my broker at least 1 month before the expiry of the fixed term. This gives them time to give me up to date rates. It also gets my application at least to a formal approval a week or two before the rate expires.
If the fixed term is the most competitive rate and I’m happy with the payments I might fix for another term.
If rates are still too high to lock in for another 2 -3 years I will look at my options.
Make some sacrifices
Can I pay extra on my home loan for the next 12 months so I can reduce the interest I pay and beat the increase this way?
Can I get the best offerings for a new business rate and maybe even hit my broker up to pay for my transfer fees?
Why not? Every dollar counts!