Interest Rate is on the move again !

Yes, interest rate is on the move again.


We have received many announcements over last week from lenders adjusting home loan fix interest rates up again. Rather than looking at the rates now, I did some analysis and did a chart over last 12 months on variable rates and fix rates trend.

I also plot another chart on Reserve Bank’s cash rate (which influence variable rate) and Treasury bond (which influence fix rate markets).

To keep things simple I only used interest rates from 5 major lenders and focus on basic variable rate, 2, 3 & 5yrs fix rate products without any special promo discounts.

This is what the chart looks like.




From the chart below it looks like fix rate have reached the bottom of this cycle during early this year (Feb09).
Not long ago a few lenders was offering 4.99% and 5.19% for 3year fix rate. It all sounds too good to be true now.

To fix or not to fix your home loan is always a hot topic in the media and questions we get asked all the time.

Here are some of the reason to fix the rate:
- You believed economy will recover and hence RBA will start to increase interest rate.
- Certainty, ie you can’t sleep at night if you don’t fix it.
- You can’t afford any more increases with your current income.
- Lock in now while it uss still historical low.

Here are some of the reasons not to fix the rate:
- Variable rate is a lot lower now, you are paying a premium to go to fix rate
- You might want to sell your property soon and you don’t want to pay penalty to get out
- You don’t mind taking the risk
- You may need to refinance the loan

There are many other questions people should be asking when looking into fix rate loans.
- Are there any rate lock option available? If yes how much is it
- Can I have an offset account link to fix rate?
- Any limitation to pay down the fix rate loan ?
- What percentage should I fix eg 100%, 80%, 50% ?
- Can I draw my extra repayments out from the fix loan ?
- How many years should I fix, 1, 3, 5, or 15 years ?

I hope above information helps you with your decision making.

Feel free to give me a call and discuss anything you aren’t sure.

Regards
Jack Wei
Financial Genius

http://www.financialgenius.net.au/