After an interest rate cut, it’s common for borrowers to start asking whether or not it’s a good time to lock in a fixed home loan rate.
Getting a fixed home loan is always a little bit of a gamble, and most borrowers are reluctant to opt for a fixed rate unless they are fairly certain that rates are at the bottom of the cycle.
Rates could go up or down
Without having a crystal ball it’s hard to know if rates are as low as they will go, but economists are predicting that there will at least be one more interest rate cut this year. It’s predicted that the cash rate will drop by another 0.25%, bringing the current cash rate of 1.75% to 1.5%.
However, those who decide to wait for interest rates cuts are running the risk that rates will instead go up and they may miss out on the best deals.
Keep in mind too that the banks are aware when rates are about to go up and will adjust their fixed rates accordingly. You can generally get the best fixed-rate deals before the official cash rate reaches the bottom of the cycle.
Rates may not go much lower
The official cash rate is already sitting at a historic low and while it is expected to drop by a further 25 basis points before the year is out, many economists have doubts about rates going any lower than that. Anything is possible, but you do have to wonder how low interest rates could go (and indeed how low individual banks are prepared to go).
Banks may not pass on cuts
Even if interest rates go lower, it doesn’t mean banks will pass on the cuts. In recent times we have seen the banks move independently of the RBA and it’s likely that they will continue to do so, meaning there is no guarantee that mortgage rates will get any lower.
Take advantage of good deals when you find them
Don’t let a good deal pass you by because you think it’s worth waiting around for one that’s potentially better in the future.
Banks and lenders are currently battling it out to provide the best deals, providing a great opportunity for borrowers to shop around and find the best fixed or variable rates right now.
If you’re looking to change home loans and aren’t sure where to begin then feel free to come in and have a chat to us at Professionals Mudgee Real Estate for our recommendations on which local banks and brokers you should be talking to.