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An interest rate cut always leaves borrowers with a feeling of glee and the opportunity to start getting ahead on home loan payments, but it also begs the question of whether or not it’s a good time to fix in your interest rate.
There are a number of things worth considering before locking in a fixed rate, with one of them being whether or not there’s a chance that interest rates have lower to go.
A number of economists are predicting that there is indeed the chance of another interest rate cute this year, however many are also predicting that rates will start going higher again as soon as next year.
So should you wait to fix in your rate, or make the most of low rates while you can?
No one has a crystal ball
There’s no way to determine for a certainty how much lower rates will go, or if they even will. You could wait for the next interest rate cut, however by doing so you also run the risk that rates will go up in that time. Keep in mind that the banks are aware when rates are about to go up too, so they will adjust their fixed rates accordingly. You can generally get the best fixed-rate deals before the official cash rate reaches the bottom of the cycle.
Rates probably won’t go much lower
The official cash rate is currently sitting at a historic low of 1.75 per cent and while it’s expected to go as low as 1.5 per cent before the year is out, many economists have been sceptical about it going much lower. Of course anything is possible, but you do have to wonder how low interest rates could go (and indeed how low individual banks are prepared to go).
Banks may not pass on rate cuts
As we have seen in recent times, the banks don’t necessarily keep their rates in line with the movements on the Reserve Bank and that means that they might not pass on any future rate cuts. Many banks have been moving independently of the RBA and it’s likely that they will continue to do so, so there is no guarantee that mortgage rates will get any lower.
There are some great deals to be had now
Banks and lenders are currently battling it out to provide the best deals, providing a great opportunity for borrowers to shop around and find the best fixed or variable rates.
If you are looking at fixing your home loan rate and would like any advice then contact Professionals Finance for assistance.