The all time low fixed rates provide an opportunity for families to maximise their earnings and savings during these uncertain times. However, they do come with some limitations that require consideration.
Borrowers’ thinking to take advantage of the low rates need to think through the benefits and limitations of a fixed rate loan as the savings do come with some restrictions.
The good news for now is that most lenders are offering split rates, and even some fixed rates with an offset account, which is essentially like making additional payments because any money you put into your offset account will go towards minimising the total interest due when interest is calculated at the end of the month. Additionally, it is much safer than relying on redraw, as lenders typically reserve the right to your redraw balance in the event they you fall on hard times.
“With most if not all lenders offering split rates and even some fixed rates with an offset account, most borrowers can achieve having a rate in the low two’s along with having the flexibility of making overpayments and redraw,” – Tim Lawless head of CoreLogic said
In its recent monetary policy decision, the Reserve Bank of Australia (RBA) maintained the cash rate at 0.25%, and Philip Lowe, the Governor of the Reserve Bank of Australia has openly said that it will not reduce unless there is another outbreak of COVID-19, nor would it increase until employment levels improved and inflation is tracking towards the 2-3% range.
In short, current circumstances have led to opportunity for those who are primed to take advantage of the efforts made by the RBA to improve the Australian economy. It is crucial for borrowers to review their finances and ensure that they are not over-paying under these new circumstances. In general, anyone paying 3.00%+ interest on their mortgage could be doing better. Debt is at the cheapest it has ever been, which is an opportunity for you to consolidate your finances as we navigate these uncertain times.
If you think you could do better on your mortgage, please do not hesitate to contact us. We are experts at negotiating and finding the best mortgage deals out there.