Fixed Mortgage Interest Rates Falling.

With all the turmoil in the world share markets in recent weeks, and real concerns over many countries sovereign debt, fixed mortgage interest rates have started to fall with some banks and lenders. In many cases a 3 year fixed rate home loan is a fair bit cheaper than the discounted variable rate mortgages the banks and lenders are offering.

There is even talk of the Reserve Bank Of Australia possibly dropping the official cash rate, which currently stands at 4.75%. Let’s hope if this happens, the banks and lenders pass on the full rate cut the RBA might pass (there may be a few rate cuts, if the world economies cant get there debt levels under control). There are certainly some genuine concerns about some of the biggest economies in the world at the moment. Australia though, at this stage, is in a good position fiscally, with our banks very healthy, and the demand for our resources still remaining strong.

In the past couple of years, generally speaking the banks and lender’s haven’t passed the full rate cut at times, they have increased there margins, stating that whole sale funding costs have increased. A lot of our banks and lenders in Australia borrow money from overseas to fund mortgages, and since the global financial crisis, there has been more reluctance from banks to lend to one another, hence the higher costs of borrowing (a basic explanation).

Now with fixed rates falling, and in some cases cheaper than the discounted variable rate, should you fix your home loan?

It may be a good time to consider fixing your home loan, or fixing part of your home loan. There are pro’s and con’s to fixing your mortgage.

Some of the pro’s are –

•You might have a cheaper interest rate than your variable loan
•You know that at least for the fixed interest rate period, how much your repayments are
Some of the con’s are –

•If the reserve bank does drop rates, you maybe paying more with your fixed rate home loan
•Generally most banks only allow a certain amount extra to be paid off with a fixed rate mortgage, if you pay more than what your lender allows, you may get charged extra fees
•You may not be able to have an offset account with a fixed rate home loan.
•Exit fees can be very high, if you pay off your fixed rate home loan, before the end your fixed rate period.
There are 2 very good articles I have written, in terms of fixed rate mortgages. They are worth a read, to learn more able the pro’s and con’s of a fixed rate mortgage –

1.What are the exit fees on a fixed rate mortgage?
2.Fixed rate home loans.
Have a read of these articles, and think what maybe better for your personal financial situation. A talk to a qualified mortgage broker, is a good place to start too, to help decide what is best for your personal needs.

If you have any questions or comments, please leave below. If you would like more personal mortgage information, please contact me anytime.