To fix or not to fix?

Deciding whether to fix your interest rate or stay variable depends on various factors, including your financial situation, risk tolerance, and outlook on interest rates.

Here are some considerations to help you make an informed decision:

Fixed Rate:

• Certainty and Stability: Choosing a fixed interest rate provides certainty and stability in your mortgage repayments, as your rate remains unchanged for the fixed term (usually 1 to 5 years). This can be beneficial for budgeting and financial planning, as you know exactly how much you'll pay each month.
• Protection Against Rate Increases: If you believe interest rates may rise in the future, locking in a fixed rate can protect you from potential rate hikes. This can provide peace of mind, especially if you're concerned about your ability to afford higher mortgage payments.
• Less Flexibility: Fixed-rate loans typically offer less flexibility compared to variable-rate loans. You may face restrictions or penalties if you want to make additional repayments or switch to a different loan during the fixed term. Keep in mind our FinancePath Premium loan offers more flexibility than most in the market, give us a call to understand how this can benefit you.

Variable Rate:

• Potential for Lower Rates: Variable-rate loans often have lower initial interest rates compared to fixed-rate loans. If you expect interest rates to remain stable or decrease in the future, opting for a variable rate could result in lower mortgage payments and overall interest costs.
• Flexibility: Variable-rate loans usually offer more flexibility, allowing you to make additional repayments, redraw funds, or switch loan products without incurring significant penalties. This flexibility can be advantageous if your financial circumstances change or if you want to take advantage of opportunities to pay down your mortgage faster.
• Exposure to Rate Increases: The main downside of a variable rate is the potential for your interest rate to increase if the Reserve Bank of Australia (RBA) raises the official cash rate. This could lead to higher mortgage payments and increased financial strain, particularly if you're on a tight budget.

When deciding whether to fix your interest rate or stay variable, consider factors such as your financial goals, tolerance for risk, and outlook on interest rate movements.

Keep in mind that you can also consider a split loan, which combines both fixed and variable rate portions to hedge against interest rate movements.

We strongly advise you speak to the team at FinancePath at 1300 780 440 to assess your options and determine the most suitable loan structure for your individual circumstances.