Should you fix?
Whether to fix or part fix your home loan depends upon your particular circumstances. Fixed rates can be useful for people who need certainty such as those on fixed incomes. People with an investment property may find fixed rates attractive because one of their major costs (mortgage) is known for a certain period. With official interest rates at historically low levels more people are certainly choosing to fix some or all of their home loan or investment loan. If you fix, you need to remember you are locked in for that period. If variable rates rise above your fixed rate you have “won” but if they go down you stay on your rate.
What is a good fixed rate?
The big banks dropped their five year fixed rates a couple of weeks ago. But other lenders such as The Greater have also dropped their five year rates. Shop around and make sure you are comparing apples with apples. Use comparison rates rather than advertised rates, which factor in establishment and ongoing fees and charges.
The big banks didn’t make the same cuts to other fixed rates, particularly the all important three year rate. The three year rate is the most popular fixed term. At The Greater, more than 50% of our fixed rate customers choose three year terms and it would be the same for most lenders.
For example when you look at three year fixed rates for packaged loans The Greater has a lower rate than the major banks.
|3 yr Fixed Rate Packaged Home Loans||Rate (Comparison Rate)|
|Greater Building Society Ultimate||4.69% (5.25%)|
|NAB Choice Package Standard||4.94% (5.55%)|
|Westpac Premier Advantage||4.99% (5.57%)|
|CBA Wealth||4.94% (5.67%)|
|ANZ Breakfree||4.94% (5.60%)|
The Greater’s Ultimate Home Loan is a packaged loan which includes a fee free transaction account, discounted insurance, financial planning, and a linked credit card with waived annual fee. Unlike many other financial institutions, The Greater offers a redraw facility on its fixed rate home loans.
Beware of honeymoon rates and the revert rate rort
Some lenders offer special honeymoon rates or short term fixed rate specials. It is important to know the variable rate that the loan will revert to once the fixed rate period is over. With some other financial institutions you are placed on a higher variable rate once your fixed term ends, a practice we call the “revert rate rort”.
With a home loan from the Greater Building Society you know all customers are always getting consistently good value rates and fixed rates always revert to the lowest variable rate of the equivalent loan.
If you’d like to know more about the best home loan for you please call one of our friendly, expert staff on 1300 721 253 or visit a Greater branch today. Feel free to ask a question or share your comments on fixing loans below.
Information correct as at 14/08/2014