Fixed rates: rip off or red hot?

Author: ME

Published at: 6/21/2016 3:29:00 PM


Fixed Rates Rip Off Or Red Hot


Is a fixed rate loan a great idea or something you could live to regret?


Home loan interest rates can be unpredictable, and if there’s one thing all home owners appreciate, it’s certainty about monthly home loan repayments.


Locking into a fixed rate loan can provide this certainty - for the fixed term at least. The rate you pay stays the same regardless of changes to market interest rates, so your monthly repayments will also remain unchanged.


This makes fixed rate loans easier to budget for. But there are downsides to consider. And even when fixed rates are lower than variable rates, it pays to look at two key traps to decide if fixing is right for you.


How flexible is the loan?


One of the biggest – and simplest – ways to save on your home loan is by making extra repayments. However this is one area where many fixed rate loans come a cropper.


It can be difficult finding a fixed loan that is flexible enough to allow additional payments.


ME’s Flexible Home Loan is a few fixed loan that lets borrowers make additional repayments - up to $30,000 during the fixed rate period at no extra charge. It can be a great way to turbocharge the benefits of fixing.


Check out the revert rate


This is often one of the biggest pitfalls facing fixed rate borrowers.


It can be tempting to focus on a very compelling fixed rate. But do check out the variable rate you’ll pay once the fixed term expires. This ‘revert’ rate can be a lot higher than the fixed rate, quickly sweeping away any gains you may have enjoyed during the fixed rate period.


Worse still, a high revert rate can leave home borrowers facing a nasty case of ‘rate shock’ as they battle to manage far higher monthly repayments when the fixed rate period ends.


This is why it is so critical to look for a lender with a strong track record for offering competitively priced home loans right across the board – variable rate as well as fixed.


Every situation is different and talking to a ME mobile banking manager can help you decide if fixing is the right move for you.


Terms, conditions, fees and charges apply. Applications are subject to credit approval.