Fixed vs Floating

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The interest rates keep falling. Are tiny interest rates the new norm? Should we

lock in one-year rates in the hope they’ll be even lower this time in 2020? Brendon

explores.

Right now, we are securing one-year fixed rates at 3.55% for many of our clients,

with two-year rates not much more. 

Like us you would have heard the economists predictions of further cuts to the

Official Cash Rate. Some are even predicting it to fall to 0.25% (from the current

1%). Holy Moley!! 

I would say, though, that the OCR is only one factor in the banks’ pricing of

interest rates. So there are no guarantees that home loan rates will drop by

another 0.75%.   

Many of our clients are taking advantage of the low one-year rate, because it is

the lowest on the market and because they believe in a year’s time rates will be

as low as they are now, if not lower. It is hard to argue with this sentiment.

If we could say one thing in these times of historic/lowest ever interest rates is

this: make the most of these rates by paying more of your home loan off. 

There are a number of ways to do this and we can help work with you find the

best option for you. The big danger in these times is that, unless you are

intentional about it, you will just adjust your budget to the new lower payments.

Don’t look back on this in 10 years’ time and see this as a missed opportunity to

take some big chunks out of your mortgage.

Brendon Ojala is a Registered Financial Adviser with Velocity Financial. No

investment decision should be taken based on the information in this blog alone. A

disclosure statement is available free of charge upon request.