Smartline Home Loans
According to Smartline Personal Mortgage Advisers, while there is always a reasonable percentage of borrowers with a fixed home loan about to mature – at some stages in the past, up to 20% of Australian home loans have been fixed – the rising interest rates of mid 2007 saw even more than normal secure a fixed home loan.
Smartline Managing Director Chris Acret said that with many taking out a three year fixed loan at that time, thousands will find their fixed rate expiring in the coming months.
“In the second quarter of 2007 interest rates started to climb following an extended period where they had remained at about 7.5%,” Mr Acret said.
“Variable rates then climbed over a 12 month period, hitting about 9% by about mid 2008.
“During this time, many people moved to the certainty of fixed rates and locked in at anywhere from 7.5% to 8.5%, most often for a three year period.
“As a result we are advising a large number of home-owners who are coming out of a fixed rate loan and who are unsure what their strategy should be, particularly in light of the fact we are in an environment of rising interest rates.”
For those who like the security of knowing what their repayments will be with a fixed rate, it may be appealing to lock back in. However, three year fixed rates are, on average, currently about 1-2 % higher than variable, which can add up to $200 per month in repayments to a $300,000 loan.
In an environment of tightening credit policies where banks are increasingly risk averse and looking for stable borrowers, those who have been able to comfortably service their loan at a rate of around 7.5-8.5% will probably be viewed favourably by a bank.
Mr Acret said this may place the borrower in a sound position to negotiate a good deal with lenders.
“However, don’t just automatically consider what your bank has to offer – increasing competition is coming back into the market and you may find a better deal with another lender,” he said.
“For example, one of the lenders on our panel is offering 6.99% fixed for three years which may be a good option for some.
“There have been many developments in the home loan market in the past few years and a range of new product offerings have been launched – that’s why it’s imperative to seek expert mortgage advice on your best options.”
Mr Acret said it was preferable to do this before your fixed loan matures.
“Borrowers coming out of a fixed rate period may be the most likely to be paying the bank’s standard variable rate (which is its premium rate), as this may be the ‘default’ rate that your bank uses once a fixed rate expires,” he said.
“Therefore, in the lead-up to a fixed rate loan expiring, borrowers should be thinking about what they want to do with their home loan – fix or partially fix for another period, go to a basic variable rate or choose a professional package – and taking action in advance of the expiry date.
“There will probably be fees associated with doing something other than going to the ‘default’ standard variable rate, but the savings associated with paying a much lower interest rate should negate these fees.”
If you need to now more about your various home loan options then visit: http://www.smartline.com.au/
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