Better Call Bill …..before accepting advice on fixed rate home loans

Interest rates are at a multi-generation low. This means it’s a terrific time to be a home loan borrower – but we’ve got a word of caution for you before you act on any advice about fixing your home loan interest rate.

Let’s start by looking at what a ‘fixed rate’ home loan is.    

Should you fix your home loan rate?

Fixed rate home loans are usually for a set period of time – often 1-5 years. After this time, the loan will usually revert to a ‘variable’ rate loan that fluctuates, normally with the Reserve Bank rates.

Although fixing your home loan makes budgeting easier and rate rises don’t affect you, you could potentially miss out when rates drop – so you’ll be paying more than you need to.

If rates go down below your fixed rate, you’ll be repaying more than the variable rate. Importantly, most fixed rate loans limit the amount of extra payments you can make each year.

Fixed rate loans may also have a ‘break’ fee, if you change or repay your loan within the set period e.g. if you sell your home.

According to Your Mortgage, the Government has abolished exit penalties on some mortgages – yes, some.  

Don’t be misinformed… take control of your home loan

Hard-working bank managers, home loan specialists and mortgage brokers rarely hold degrees in economics. It is simply unrealistic to think that these specialists can keep up with the mountains of domestic and global economic data that influence the future direction of interest rates.

My home loan is currently with Westpac so taking interest rate advice from anyone less qualified than Westpac Chief Economist Bill Evans or his counterparts at the large Australian banks, really doesn’t make a whole lot of sense.  It certainly is a great time to be a home loan borrower but here at Joust, we encourage you to exercise a degree of caution before rushing in to any fixed rate offers.

Own your home loan – not just your house. Spend the time to understand why you have the loan you do, and if it’s the best loan for your individual needs. Only then can you get the best possible price you can. 

Find out how Joust works and whether it’s for you, or email us at info@joustnow.com.au.

Mark Bevan, Joust Founder