Many home loan holders watch mortgage rates, but don’t develop a strategy to combat rate rise, stagnating rates, or rate fall. Instead they anxiously wait for Reserve Bank announcements and worry about how they’ll find any extra money to meet mortgage repayments if home loan rates rise.
Let’s look at how you can keep the mortgage monkey off your back and develop a sound strategy to combat rate change.
Rather than following this traditional route consider how you can stay ahead of mortgage rate rise and also find yourself the best deal to save money. To do this you need to forecast what mortgage rates will do and look at your options sooner, rather than later.
Locking in your rates when they are lower can save you the stress of rate rise. It will also allow you to budget better. But, you also need to be aware of break costs and other associated fees, and consider your own circumstances. If you’re not going to stay in your home for more than 5 to 8-years, then it’s highly recommended that you don’t lock in your rates as you won’t recoup costs.
If Rates Stay the Same
Interest rates have been at historical lows for a number of years. Many economists are predicting that rates will stay on hold for at least another 12-months before the Reserve Bank make a move.
In Australia, variable rates are typically being offered at 5 percent or less. This means if you currently have an interest rate that is higher, then you should be looking at how you can negotiate a better deal.
Firstly, discuss your options with your existing lender. Then research the market. If you’re staying in your home for another 5 to 8-years and you’ve found a comparison rate that is cheaper than your existing rate, then negotiate a better deal with your existing lender. If they refuse, then consider taking your business elsewhere.
If Rates Fall
After years of historically low interest rates it’s highly unlikely that rates will continue to fall. But if they do, then it’s important for you to review comparison rates to ensure you’re getting the best deal. Refinancing or taking out a home loan at the cheapest variable rate, when rates are at their predicted lowest, can ensure that when rates rise you still have an affordable loan. Many home loan holders also consider fixing their home loan when rates are at their lowest as this ensures that they lock-in the cheapest rate possible and hold onto it for longer.
Do you want to beat mortgage rate rises? Then contact eChoice and find the right home loan for you.
Written by eChoice