Promoted by loans.com.au
After hitting record highs in 2020, fixed mortgage rates began to rise again in 2022 after the Reserve Bank abandoned its 2024 forecast of a cash rate increase and its ease Term Funding (TFF) ended, and APRA increased its service buffer from 2.5% to 3.0%.
Although the cash rate is expected to remain unchanged until at least 2023, this has not stopped lenders from raising their interest rates on home loans, mainly on their fixed rate products.
Fixed interest rates are expected to continue to rise sharply in 2022 before eventually stabilizing after three-year fixed loan rates have risen more than 80 basis points in recent months from 2021.
With fixed-rate loans accounting for nearly half of all new mortgages, any further rises are expected to have significant cash flow implications – especially for those who have taken out mortgages. fixed rate mortgages in 2020 (when rates were at their lowest) and be required to refinance at significantly higher rates.
Is 2022 your last chance to lock in a low fixed rate?
One of the main reasons for the popularity of fixed rate home loans is that the rate is fixed for a fixed period, thus protecting the borrower from increases in the cash rate. Even a relatively small increase in the official exchange rate can have a significant impact on mortgage repayments, which is why many borrowers choose to "lock" their rate for a set period of time to avoid this.
Locking in your mortgage payments means you have cash flow certainty for a few years and can budget accordingly for the period you set. However, it is important to keep in mind that the cash flow impact of a rise in interest rates will be greater on your loan on your principal residence (PPOR) than on your loan. your investment loan, due to the tax deduction you get for investment debt.
For example, if the interest rate on your $600,000 home loan were to increase by 1%, the cash flow impact is $6,000 per year. However, if your $600,000 investment loan rate also increases by 1%, the after-tax cash flow impact is $4,000 (after your tax deduction).
As a result, it might be a good idea to consider fixing your PPOR home loan rate first. We offer a Smart Booster Investor Bundle that allows you to bundle your home loan with your investment loan. You can also choose to split this loan with one of our low rate fixed loans. By splitting the loan with one of our fixed rate loans, you can hedge against future rate increases with the fixed component, and also make additional contributions to pay off the loan faster while rates are down. historically low levels on the variable component.
At the end of the day, if you're looking for rock-bottom interest rates, you've probably missed the mark. However, in a few years, the rates currently offered might seem like a very good deal. It's important to do your own risk assessment and due diligence as an investor, but keep in mind that you don't want to go back to that period five years from now and wish you had locked in a low rate when you had the opportunity.
The good news is that right now some lenders are still offering great fixed (and variable) interest rates. At loans.com.au we offer competitive investment rates.
————————————————————- ————- —
Marie Mortime is Managing Director of loans.com.au, one of Australia's largest online lenders. Since Marie started the business over 10 years ago, Marie has grown loans.com.au into a business with $6 billion in home and car loans. Marie is dedicated to improving the financial literacy of all Australians and is passionate about the FinTech industry in Australia. When not at work, she enjoys spending time with her husband and two young children.
loans.com.au is an online lender for home and car loans. For over 10 years Australians have trusted the local team at loans.com.au to support them with low home and car loan rates, approved quickly through the online loans app. com.au.
Top Suburbs:
west geelong
,
new farm
,
keperra
,
artarmon
,
redcliffe
Get help with your real estate investment
Do you need help finding the right loan for your investment?
When investing in real estate, it is important to ensure that you not only have the lowest available rate possible, but also have the loan features to suit your needs. Just fill in a few details below and we'll then make sure you get it right. A local mortgage broker contacts you and determines the characteristics or types of loans that suit your needs. We'll even help you with the paperwork. In addition, an appointment is free.
We respect your privacy and treat all your information seriously – you can consult
our privacy policy here
