As we continue to ride the roller-coaster of 2020, we understand your situation may change during these uncertain times. For this reason, it’s a good time to review your home loan and potentially leverage opportunities available to ensure you have the right loan to suit your needs.
While some things are uncertain, what we do know is interest rates are currently at an all-time low. 3-year fixed home loan rates are now as low as 2.18% p.a.* If you are not intending on selling your property over the next 3 years, now is a good time to consider fixing your interest rate.
Why now?
The RBA has stepped-in to directly reduce 3-year interest rates by setting the new 3 year Australian Government Securities Target at 0.25%. This is part of the RBA’s unprecedented policy response to offset the economic impacts of COVID-19. Prior to this, 3-year interest rates were freely set by the market with the RBA only indirectly influence it through its overnight Cash Rate (also now at 0.25%). Unlike before, there is more certainty with the direction of 3-year interest rates with the RBA's policy position.
3-year interest rates are unlikely to go lower. For it to go lower, the RBA would need to set negative interest rates. This is unlikely since the RBA has stated that it would prefer alternative measures if it needed to provide more stimulus.
Low fixed interest rates will not last forever. Once the economy shows signs of recovery, the RBA is expected to stop reduce the stimulus that it is currently providing.
Lending criteria to get stricter - Although ultra-low rates look like a competitive loan market, we are actually seeing lending criteria getting tougher as lenders view the risk of defaults increasing and need to provide relief to affected existing borrowers.
Valuations are likely to fall due to the impact on the property market. It is wiser to order your upfront valuation sooner rather than later.
To find out more and whether a fixed rate home loan will suit your financial needs, we recommend contacting us to discuss your options.
* Comparison rate 2.81% p.a.Comparison rate calculated on a $150,000 secured loan over a 25-year term. WARNING: Comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Your full financial needs and requirements need to be assessed prior to any offer or acceptance of a loan product.