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Fixed Rate Loans May Still Be an Enticing Option

fixed rate loansWhile writing a piece for the website, Venessa Paech talks about borrowers’ growing penchant for variable rate loans. They are quite willing to shun off the lure of fixed rate loans believing that the ‘variable rate’ stuff will offer them greater benefits in the long run.

Fixed rate loan numbers bottoming out

After reaching a phenomenal figure of 10,631 in May 2013, the fixed rate loan call is fast bottoming out, dropping by nothing short of 17% since. This trend is cemented by the near-explosion rate at which variable rates are peaking, growing by 15% over a similar timeframe.

Best time to lock in

Fixed rates are giving every impression of an imminent hike and this can be the ‘waterloo’ for borrowers who may not only be missing out on great deals but preparing themselves for uncertainty and subsequent frustration associated with the variable rate territory.

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Low mortgage liabilities

It is significant that buyers see the overall picture and not get too carried away with the vision of a lucrative deal. Such deals may quickly fade away giving a bitter aftertaste. The economic stimulus is just perfect for the real estate at the moment and government is seeing through its ‘reduce cash rate’ strategy till the very end.

Government’s policy has paid

However, now that the Australian government has more than succeeded in putting the construction industry and the property market back on track by reducing the cash rate (and sticking to it for more than a year now), we may see cash rates shooting upwards from here on.

When that occurs we might just see fixed rates adjusting themselves and shooting up in similar proportions. As and when that happens, variable rate loans may present themselves as the saviour for the borrowers. So in a way, it is a double-edged sword.

Here is hoping you fall on the right side of it.