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Interest rate cycles, fixed and variable interest rates

On the first Tuesday of every month the Reserve Bank of Australia meets to discuss using a simple lever to stimulate or reign in the Australian economy. Now, arguments aside as to the effectiveness of this particular lever in current climate and or the meaning behind the numbers; it is the chosen control that has simple and regular impact on all mortgage holders in Australia.

Almost uniformly all Aussies could care less about the reasons behind the rate changes – they just want the cheapest home loan they can get, and as a sydney mortgage broker I want to help them do just that!
Which brings me to interest rates themselves. Currently (October 2013) we are experiencing some pretty darn cheap interest rates, historically the lowest Aussies have ever seen – in fact – it’s hard to imagine them going much lower at all. But we don’t have a crystal ball and we don’t know what’s coming so borrowers are understandably looking for expert advice on what to do and the question on everyone’s mind – should we fix or stay variable?
Here’s the disclaimer – nothing I write here can take into consideration your personal circumstances, we’re talking broad topics here, not personal advice – nor am I in possession of the above mentioned crystal ball.
The conversation I am having with my clients is around their goals and how long they plan to own the property and do they think rates are going much lower.
Personally, a major economic event aside, I don’t see rates going anywhere much in any kind of hurry – not up and not down by much until we have some more confidence and stability in the economy.
So for my mind, the fixed rates on offer presently which are under 5% are looking interesting. It’s hard to imagine (unless you have other goals) that you’d be disadvantaged too much by locking in 4.79% p/a for 2 or 3 years. And I am more than happy to discuss your personal circumstances with you and give you some firmer advice – give me a ring.
And what am I doing personally? Well I think it’s possible I’ll be selling my home within the next three years – I have a mind for a change of scenery – so I am staying variable with my home but I am going to lock in my investment properties, who can resist 4.something for three years!! By the way, it’s a simple way to improve the return on your investments – reduce the outgoings is almost as effective as increasing the incomings!
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