Fixed vs Variable Mortgage in 2019: Which is better? HD

Fixed vs variable rate mortgage in 2019, is now a good time? With the cash rate at a record low, and interest rates paralleled, the question “is now a good time to fix my mortgage” has never been more prevalent. More and more I’m asked, but, what factors should you consider, and how do you know now is the right time to fix in your mortgage? https://www.huntergalloway.com.au/fixed-interest-rates/ Well, firstly, lets look at the difference between your two options, fixed or variable, from there, we’ll delve into the mechanics that’ll drive your decision. A variable is an interest rate that increases and decreases with the market and over time generally allying itself with the cash rate. Your repayment too sway with this movement, essentially the higher your rate, the higher your repayment, with the converse also being true. . With a Fixed rate you can typically choose from a 1 - 5 year, it’s in this period your interest rate doesn’t change, as the name implies it’s fixed. Ordinarly, a standard home loan term is 30 years, so if you chose a 5 years fixed rate, once this ends you’d revert to a variable home loan rate, with 25 years still remaining. It’s at this time you can elect to go for another fixed rate or stay on a variable. Too many jump into a fixed rate when the banks offer is enticingly low rates, but don’t fix based on this. When you’re at the casino the odds are stacked against you and like a casino, the goal for the bank is to make money. With fixed rates their goal is that fixed rates be higher than the variable rate in that same period, if successful they reap the reward. It’s by understanding this, we can make better subsequent decisions and rather than get caught in their trap, avoid it completely. • https://www.canstar.com.au/home-loans/is-now-a-good-time-to-fix-my-home-loan/ • Some good graphs here → first one is prob the best, “retrospective look” So why should you fix? The first question should be, are you after stability, that is, do you want to know both now and in the future what your repayments will be? This is vitally important if you’re a budgeter, need continuity, don’t want your lifestyle to change from increasing repayments or expecting a life event such as having a baby. By choosing a fixed rate based this you’ll give yourself the greatest chance of success, because if rates go up or down, you’ll have made your decision in knowing and gaining certainty on repayment, flipping this based on rates, you’ll always be frustrated as if rates were to decrease, your inclination will be to break and chase lower offered, which only leads to fees and charges including what’s known as a break fee. Whilst a fixed rate has a number of fantastic perks, one of the detriments is this the break fee, essentially a fee based on how much the bank loses by releasing you. How it’s calculated is the difference between the banks cost of funding at the time you fixed your rate and when you break it. So let’s say you elected for a