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Choosing the Right Term for Your Fixed Home Loan

February 7, 2023

When it comes to choosing the right term for your fixed home loan, it’s important to consider how long you should fix your loan for. This decision can have a significant impact on your financial situation, so it’s important to weigh up the pros and cons of different loan terms before making a decision.

 

The length of your fixed home loan term will determine how long you’ll be locked into the same interest rate. Generally, the longer the term, the lower the interest rate. However, this isn’t always the case, so it’s important to compare different loan terms to find the best deal for you.

 

Children are playing with each other in the bedroom

 

When deciding how long to fix your home loan for, there are a few factors to consider. Firstly, consider your current financial situation. If you’re in a stable job and have a good income, then you may be able to commit to a longer loan term. On the other hand, if you’re in a precarious financial situation, then a shorter loan term may be more suitable.

 

It’s also important to consider your future plans. If you’re planning to move house in the near future, then a shorter loan term may be more suitable. This will allow you to move without having to break your loan contract. On the other hand, if you’re planning to stay in your current home for the foreseeable future, then a longer loan term may be more suitable.

 

It’s also important to consider the costs associated with breaking your loan contract. If you decide to break your loan contract before the end of the term, you may be liable for significant break costs. These costs can be significant, so it’s important to factor them into your decision.

 

 

Finally, it’s important to consider the current interest rate environment. If interest rates are low, then it may be beneficial to fix your loan for a longer term. This will allow you to take advantage of the low interest rates for a longer period of time. On the other hand, if interest rates are high, then it may be beneficial to fix your loan for a shorter term. This will allow you to take advantage of any potential future rate cuts.

 

 

In conclusion, when deciding how long to fix your home loan for, it’s important to consider your current financial situation, future plans, break costs, and the current interest rate environment. By taking all of these factors into account, you can make an informed decision about the best loan term for you.

 

February 2024 Cash Rate

February 6, 2024
Property and cash rate predictions for 2024

Banks “stand ready to help” people with home loan problems

January 3, 2024
The Australian Banking Association (ABA) has launched a campaign encouraging borrowers struggling with loan repayments to seek help, in a valuable reminder there are options available if you're finding it hard to keep up with your mortgage. Your bank may be able to: Reduce your home loan repayments. Pause your repayments temporarily. Switch your repayments from principal and interest to interest-only temporarily. Increase the length of your loan (thereby reducing the repayments). ABA CEO Anna Bligh said banks understood many borrowers were facing challenging circumstances. “Banks stood by their customers during the COVID-19 pandemic, deferring payments for people who for the first time in their lives found themselves unable to pay. Banks stand ready to help people again now,” she said. “People who are finding their finances are stretched should not feel they have no options and they have to do it on their own. Banks have dedicated, highly experienced teams ready to help.” As your broker, I'm also here to help. You're welcome to contact me for advice; I can then speak to and negotiate with your lender on your behalf. The key thing is to move fast, because the further you get ahead of the problem, the more flexible and helpful banks tend to be.

Is 2024 the year to buy property?

January 2, 2024
The Reserve Bank of Australia has rounded out 2023 with the decision to hold the nation’s cash rate at 4.35%. 2023 hasn’t been an easy year for homeowners or ambitious first-home buyers. The cash rate increased from 3.10% to 4.35% over the course of eleven months in the RBA’s bid to bring inflation back within its target range. According to data from the RBA, the average home loan rate at the start of the year (for existing home loans) was 5.46% p.a.. If the lender passed on interest rates in line with the increased cash rate, that would make the interest rate 6.71% p.a.. Based on the average Australian mortgage of $599,000 on a 25-year term paying principal and interest, that equals an additional $459 per month simply to service the mortgage (from $3,661 to $4,123 per month). For first-home buyers, the average time to save for a deposit has increased to 14 years, according to a recent paper by the Australian Housing and Urban Research Institute Limited, with the national ratio of median house price to median income now sitting at 8.5. That is the hard reality many Australians are currently facing. So the question is, what will 2024 bring? Short of looking into an Australian-economy crystal ball, we can’t predict exactly what will happen with inflation, the cash rate and therefore interest rates. However, there are a couple of factors to consider. The RBA will meet only eight times in 2024 to determine whether to move the cash rate, down from the eleven in 2023. This means potentially less movements through the year. The next cash rate announcement will be 6 February. Economists from the Big Four predict the cash rate is at, or near, its peak. Some predict at least one more rate hike in 2024 and rate cuts likely not happening until at least December. Despite predictions of a decline in house prices in 2023, they have actually continued to increase in most areas around the country. This could be good news for refinancers as we enter 2024, as they could find their equity has grown. Why 2024 could be a good time for first-home buyers Despite some potential challenges, 2024 could actually be a good time to get into the housing market. Here’s why. Savings interest rates are up - the pro of the cash rate going up is that savings interest rates also tend to go up. This can help expedite saving for a deposit. It could be cheaper to be a homeowner - according to PropTrack data, it is now cheaper to buy an apartment rather than renting one in most capital cities (based over a ten-year period with a 20% deposit). In fact, a third of properties nationally are cheaper to buy than rent. The First Home Guarantee has expanded - in 2023 the eligibility criteria for the First Home Guarantee, Family Home Guarantee and Regional First Home Buyer Guarantee was expanded, enabling eligible buyers to get into the market sooner. This means if you have a 5% deposit (or 2% if you are a single parent or guardian), you may be able to use one of the schemes to purchase property without paying lenders mortgage insurance. ‘Help to buy’ scheme to be introduced - the federal government has announced plans to rollout a new scheme that will help up to 40,000 eligible buyers with as little as a 2% deposit get into the housing market with lower repayments. If 2024 is the year you want to purchase your first home, it is a good idea to speak with your broker to find out how much you may be able to borrow and set a plan in place to achieve your goal.
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