FIX OR NOT TO FIX

It is certainly worth considering. There may be arguments for and against fixing though.

Hi Zehra,

would you say more argument to fix tho ?

That is quite dependent on your circumstances – financially it may be beneficial right now, but then it “locks you up” in a Fixed Loan, and the costs of breaking them can be HUGE !!

Like, don’t go Fixing a loan if you have any plans to sell within that 3 year period, or if you think you might need to re-finance within those 3 years. Is your current income secure (are you a PAYG employee, and is the company “in good shape” and liable to keep on employing you for the next 3 years – or are your skills such that you can “walk into another job anywhere”?)

Also, be prepared for a sudden jump in Rates when exitting from the Fixed Loan in 3 years time. I used some a bunch of years back and the 6.1% Fixed rate ended in early 2009 just when Variable Rates had gone to 9.10% – no, it was not a 3% increase, it was around 50% !!! OUCH!!!

I am sure there could be lots more reasons that Terry can add too, especially with his knowledge. The above are just a couple of the more well-known reasons to fix, or not. Certainly, now is a way better time to fix than 2009 (when at 9.1%). Unfortunately many “Mums’n’Dads” DID fix at 9.1% back then – they couldn’t afford to pay higher, so they locked in at that rate. And then the RBA realised they had got it wrong, and the Rates were on the way down to the “lowest in history” by the end of that year.

Fixing right now is financially not too bad at all – just be aware of some of the traps, especially the Break Cost.

Benny