FIXED VS VARIABLE MORTGAGES

While interest rates are low, as they are now, it is tempting to lock in your mortgage to a fixed interest rate. This will ensure that you benefit from the lower interest if rates go up, and banks tend to offer good deals to fix interest rates as it is guarantees the amount of income from you.


However, the catch is that if you fix at the current interest rate, expecting rates to rise and they drop, you are looking at paying more than you would on a variable. There are also pitfalls to watch out for with fixing your interest rate such as whether your bank will still allow you to have an offset account. Most don’t allow offset account for fixed rate mortgages, and offset accounts can be quite a valuable way to reduce your interest while keeping cash available.


Lenders do allow fixing part and keeping the remainder of your mortgage variable, thus minimising the effects of both rate increases and decreases. It is worth speaking to a mortgage broker about the pros and cons of fixed versus variable mortgages and researching which is better for your situation.


Disclaimer: The postings on this site are my own and don’t necessarily represent the views or opinions of Total Financial Solutions Australia (AFSL# 224954)


This information does not take into account the reader’s objectives, financial situation or needs. For this reason, before you act on this advice, you should consider the appropriateness of the advice taking into account your own objectives, financial situation and needs. Before you make a decision about whether to acquire a financial product, you should obtain and read the product disclosure statement.


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