One of Australia’s leading non-bank lenders says with some fixed rates currently up to a percent lower than they were just one month ago, the decision to fix all or part of a loan for cash strapped borrowers is now significantly more appealing.

 

Resi Mortgage Corporation’s Head of Consumer Advocacy, Lisa Montgomery, says this is one of the most dramatic falls we have ever seen in fixed rates over such a short time - and with official rates now predicted to fall over the next few months, the incentive for borrowers to consider fixing their rate has accelerated.

 

Montgomery says: “No-one has a crystal ball to know exactly how far official rates may go down over the next year, and indeed whether any, or all of those official rate decreases will be passed onto customers by their mortgage providers.”

 

“However, for borrowers already feeling the effects of four official rate rises since August last year and concerned by the very nature of their standard variable rate, some will be understandably looking to cap their repayments - and now may provide an appropriate time to fix all or part of their loan.”  

 

She says, “to illustrate just how quickly rates have dropped, Resi’s three year fixed rate of 8.52%* is now around one percent lower than it was at the beginning of July – a trend mirrored by many other lenders.”

 

“This therefore provides an opportune time for some concerned borrowers to weigh up the merits of fixing their rate over the next three to five years, in order to give them some certainty with their repayment levels,” says Montgomery.

 

“However, the important thing for borrowers to remember is that this should not be seen as an invitation to rush into a quick-fix solution – as the downward cycle has only just begun and is still to be fully played out.”

 

But for some concerned borrowers, switching to a fixed loan may be more of a necessity than an option as the pressure of the last twelve months is realised.

 

These borrowers may want to insulate their financial situation from possible future events such as:

 

Potential job loss - if you are suddenly out of work for any period, would there be a financial buffer to allow you to continue your mortgage repayments?

 

Maternity Leave - if you are planning to have a baby and leave the workforce either momentarily or long term, will your maternity leave payments cover the entire period?

 

Necessary works/repairs to your property - are there necessary works or repairs that may have to be carried out to your property in the next few years such as plumbing, electrical, or structural activities?

 

Costs for children’s education - is there an upcoming change in your child’s education needs that will impact your family budget – such as the introduction of daycare, school or university fees?

 

Montgomery says even when these elements have been considered, it’s equally important for borrowers to understand that when they do fix a rate they may be subject to some penalties if they want to adjust the loan in any way or pay it out early.  

 

“These costs also have to be factored in and weighed up in the borrower’s final decision,” she says.

 

“And for those who still can’t decide either way – they may consider a split loan which allows them to secure part of their loan at a fixed rate whilst leaving a portion of their loan on a standard variable rate.”

 

Montgomery says “put simply, fixed rates do give borrowers some stability over a set period of time but every borrower must balance this against how they will feel if a lender’s standard variable rates go down by a greater overall amount during the same period.”

 

If you would like any more information on our fixed rates then click here to make an appointment with one of our lending & mortgage specialists.