It’s the age old question…. Fixed Vs Variable.
For the entirety of my banking career, I’ve witnessed interest rates steadily decrease, making borrowing cheaper for homeowners. However, we’re now seeing signs of change, with fixed interest rates already rising since December 2021. The most common thing I hear from clients lately is: “I have to fix my loan now before interest rates go up.”
But here’s the reality: fixing your loan right now might not be necessary—or even the best move for you. If you’re only fixing your loan out of fear that rates will continue to rise, you could lock in a higher fixed rate only to see rates drop slightly later in the year.
On the flip side, staying with a variable rate could leave you exposed if interest rates increase rapidly, pushing your variable rate higher than the fixed-rate options available. The truth is, nobody has a crystal ball, so trying to predict market movements can be a risky game.
So, what advice am I giving to my clients? Focus on what you can control. Here’s a few things to consider:
What to consider:
- Your Lifestyle
Consider how your loan fits into your lifestyle. Are you planning on staying in the home long-term, or do you see yourself moving in the next few years? Your loan strategy should reflect your future plans. - How You Like to Use the Loan
Do you prefer stability in your repayments, or do you like flexibility? Fixed loans offer predictability, while variable loans can provide flexibility if you plan to make extra repayments or pay off the loan faster. - Your Current Repayments
How much extra are you currently repaying? If you’re already making additional payments, a fixed loan might limit your flexibility, whereas a variable loan could offer more freedom. - Your Risk Appetite
How comfortable are you with risk? A fixed-rate loan provides certainty, while a variable loan might be better if you’re comfortable with potential rate fluctuations but want lower rates initially.
Once you’ve thought through these factors, you’ll be better equipped to match the right loan structure to your needs, giving you some stress relief. You may not have the cheapest option, but you’ll have the right option that works for your lifestyle.
Need More Help?
If you’d like to discuss your loan structure and which option is best for you, feel free to book a free Zoom meeting here.
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