Home Loan Fixed Rates are they a gamble? This is a thought that has been occupying What If We Finance more and more and recent research by Canstar has found that typically its a 50/50 proposition . More specifically will you come out ahead financial when fixing your home loan?
As an example the research shows that borrowers who fixed for 3 years during the GFC in 2008 were on average $22,000 worse off. The cash rate had peaked at 7.25% before it fell to 2.5% and as Canstar’s research shows when fixing a home loan it is extremely difficult to predict what may happen during the fixed rate period.
Canstar’s research assumes a $300,000 interest-only home loan and compared the losses and gains of fixing relative to a variable rate. In addition borrowers who fixed their home loan in November 2005 would have been $25,000 better off, conversely borrowers who fixed in March 2005 would have been worse off.
Canstar’s research validates mortgage broker What If We Finance’s opinion, many things can change during a fixed rate period and the recent economic volatility illustrates this. You only have to look at the press and opinions on whether interest rates will go up or down vary week by week or by economic news release.
Fixing a home loan provides certainty of repayments and should not be solely done to save money. Predicting interest rates is risky and things change quickly and remember it is very hard to beat the bank!
Contact your mortgage broker What If We Finance if you would like to find out more about fixed rates.