Dear Vanessa,
I feel completely stuck when it comes to my mortgage. My fixed rate will end soon and I have no idea if I should lock another fixed rate or variable.
I keep hearing different opinions – some say that rates are rising again, others say they will fall. I don't want to make the wrong decision and ultimately pay more than necessary.
For context, I have left for another 15 years to a 30-year mortgage and a reasonable amount on an offset account. I can now afford my repayments, but if the interest rates rise much higher, things can become tight.
Do I have to determine my rate for peace of mind or remain variable if the rates fall? I would like to keep your thoughts.
Deidre.
Dear Deidre,
You are not alone – this is a question that many homeowners are currently struggling with. There is no magical answer because nobody can predict exactly what interest rates will do, but there are a few ways to think about your decision.
Leading money trainer Vanessa Stoykov
First ask yourself: how much certainty do you need? A fixed rate means that you always know what your repayments are, which can be reassuring if you are concerned about rising rates. But if the rates fall, you can ultimately pay more than necessary.
Variable rates, on the other hand, move with the market, which means that your repayments can go up or down. They also tend to have more flexibility – such as offset accounts and the possibility to make extra refunds without a fine.
Since you already have an offset account, that is a great tool if you decide to remain variable. Every dollar there reduces the interest that you pay, which can make a big difference over time.
If you tend to repair, check that you can still make extra refunds or use your offset – some fixed loans are restrictive.
Another option is a split loan – determining part of your mortgage while keeping the rest variable. This can be a good middle ground, which gives you some certainty and still make flexibility possible if the rates change.
However, the big question is not only on fixed versus variable – it is that you actually have the best loan for you? Many people roll in what their lender offers without realizing that they could get a better deal elsewhere. If you have not compared the rates lately, this is the moment. You can use a mortgage tracker to see how your loan accumulates against what is available.
But your mortgage is only one piece of the puzzle. Your decision must fit in your larger financial image – how this influences your super, savings and future goals. A financial planner can ensure that you think in the long term, not just about your next refund.
If you want expert guidance, I offer a free reference service Australia to connect with familiar financial planners and insurance specialists who can help you place the right strategy.
Whatever you decide, the most important thing is that your mortgage works for you, not the other way around. A little research can now save a lot of money in the long term.
Good luck,
Vanessa.
