Fixed or Variable?

Hi Scott,

I am wondering, given current home loan interest rates, whether you still recommend a variable home loan with no frills and extras. Fixed-term home loan now rates are as low as 1.9%, so they are very tempting!

Erin

Hi Erin,

Yes, they’re low right now.

However, the banks have begun hiking their fixed term rates, especially their four- and five-year fixed-term loans.

Why?

Well, I guess they’re picking up what the Reserve Bank is putting down: money may be dirt cheap now, but with the economy on steroids it’s unlikely to be in four or five years’ time.

So should you snap up a fixed-term rate?

Well, it’s a personal choice but, if you do, read the fine print: they’re generally not as flexible as variable loans and it may restrict how much you can repay. For most homeowners, getting the lowest variable home loan rate you can find, and paying it off as quickly as you can, still makes sense.

Scott.