I know this question is often asked but I figure your answer changes as the economy changes. I have noticed that fixed interest rates are dropping and I am wondering if this is a good time to fix my home loan interest rate?
Fixed rates are falling, especially for the shorter-term fixed rates and I suspect they could fall more, given what we’re seeing on international bond markets. There’s a sense that the global recovery is slowing and that has driven bond yields down and this is even making some experts predict that deflation is a bigger threat than inflation.
If this proves right then interest rates will fall and here they could drop as well if stock markets keep falling, like we have seen recently. On the other hand, if good economic news starts to emerge then rates could rise.
So we’re in a tricky time to predict interest rates and to make decisions about fixing or not. I think it could pay to wait for a month or two to see how the global economic troubles play out. However, I recently interviewed economist Michael Workman from the CBA who thought two more interest rate rises this year are still on the cards.
However, Citibank’s chief economist Paul Brennan says rates could be on hold to December if inflation comes in on the low side at the end of July.
If variable rates are on hold then fixed rates could fall. If you are worried about future rises, then think about fixing half of your loan, which will effectively halve the effects of any future interest rate rise.
Good luck with your big decision!
For advice you can trust book a complimentary first appointment with APS Growth today 1300 881 402 or 02 9905 8878
Important information:
This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.
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