With interest rates climbing for the first time in over five years, we're getting a lot of queries across our desks asking whether it's worth breaking and refixing existing loans.
But the question is - should you break yours?
There's no doubt that we're under some rate pressure at the moment - but conversations in our office are always about taking the customer centered approach of - what's right for you and your situation?
The key things we're asking our clients are;
1. How much risk are you willing to take? Everyone has a risk appetite of some kind - whether it's to risk it all for a large gain or to make sure the risk is as low as it can be. In home loans, that risk profile might be that you want to have certainty of your repayments for a longer period of time, or that you're willing to take a lower rate for a shorter time period and absorb any potential rate increases.
2. What's going on for you financially? Are you buying your first home as a young professional couple, or are you onto rental property number four, wanting to purchase again in the next 12 months? We can help you assess your cashflow position and ensure that your fixed rate period is targeted towards achieving your goals - regardless of what the rates are doing.
3. What might an increase look like for you? If you're considering a shorter term fix, have a think about what a rate increase to 4% might look like for the amount you've borrowed. Does this fit into your budget? You can check out our home loan calculator here and experiment with different rates and periods which can help set a structure for what might fit for you.
The big variable is "when are rates going to increase and what might that be?" - and that's something at this stage, no one can answer.
However what we can do is review your personal situation and give you some advice based on our discussions - advice that will set you up to manage any rate eventuality.