What should you do when your fixed rate finishes?

Thursday 25 July 2019, 8:37AM
By Zebra Loans

We get this question asked all the time. To start, it’s important that you think about what your long term plans are with your property. For example, are you a couple living in your first home, or are you an investor?

Obvioulsy, dfferent rate startegies may apply here. For example, a couple living at home, planning a budget may find certaintity in fixing for a longer period. This is advantageous at the moment as long term interest rates are low. However, an investor may need some flexiability in order to sell their property. Having a rate on a 1 year fixed, or even on variable, gives them the ability to sell without incurring break fees. 

Therefore, If you like having certainty around your repayments, you can re-fix your home loan. You can reserve a rate up to 60 days before your current fixed-rate period ends. Zebra Mortgages can help you with this. If you want to spread the risk of changing interest rates, you can split your loan into two or more fixed-rate periods. If you want more flexibility to make extra repayments and pay off your loan faster you can change all or part of your loan to a variable rate. 

Another advantage of the variable floating rate is that if you want to make a lump sum payment, you can do so without being charged an eary repayment fee. 

If you are considering variable though, you will need to consider what might happen if interest rates rise. We can help you with a quick budget to plan what might happen if you lose your job, or something unforeseen happens.

In other words we believe it’s about making the best decision to match your current situation and future goals.

How interest rates work

The OCR is set by the Reserve Bank. The rate is set based on economic theory to either stimulate or slow down the economy. As the economy and business confidence are very low, the rate has never been lower,.

What happens in the future

The ANZ as well as many of the major banks bring out a fantastic monthly report that includes graphs at the end of it with indicators of what their team of economists see for the future of mortgage interest rates. Just remember there are many unforeseen events that can change this, so at the end of the day doing a budget and seeing how much room you have for movement is really important.

Whilst it is hard to predict what might happen in the future, the reserve bank have suggested that these rates may fall again. Whether this will translate to the consumer remains to be seen, however what we may see is consumer rates stay as they are for a very long.

So how can Zebra help

If you have a rate ready to expire then Zebra Mortgages can help with your refix. We have the ability with the bank to break down your lending and choose a structure of different rates to help balance any rate increases in the future. A standard structure of a 500k loan may see 100k fixed for 1 year and another 200k fixed for 2 years. It depends on your personal circumstances. That is why it is best to talk to us. We can tailor advice and structures specific to your needs.

Find out more at Zebra Mortgages.