FInance: Rates for homeowners slashed to new lows

HOMEOWNERS who are considering fixing the interest rate on their mortgage have been presented with a great opportunity, with some of Australia's major lenders slashing their five-year fixed rates to historically low levels in the past week.

Until now, getting a five-year fixed rate under 5 per cent has been virtually unheard of.

Today, however, many of Australia's lenders are offering five-year fixed rates at just 4.99 per cent.

Late last month, National Australia Bank and the Commonwealth Bank of Australia cut up to 70 basis points from their five-year fixed rate home loan, taking their rates to new lows.

So now could be a good time for mortgage holders to consider their loan options.

Deciding whether to fix your home loan is not a decision that should be made lightly.

Before making any decisions, it is important for you to educate yourself about the market and understand whether fixing your mortgage will benefit you in the long run.

In addition, it is important to consider your future lifestyle and financial goals.

Would you like certainty around your mortgage repayments?

If so, then fixing might be the option for you.

Alternatively, are you comfortable managing your finances and prefer to keep your options open in case rates drop further?

If you did decide to fix your mortgage and rates were to fall further, you would be unable to take advantage of these lower rates.

Weighing up the pros and cons associated with fixing your mortgage is vital because it will help you understand exactly what you are getting yourself into.

Though deciding whether or not to fix your mortgage can be a tough decision, you can take solace in the fact that it is a dilemma many homeowners and buyers face.

And, with many of Australia's lenders slashing the interest on their fixed-rate products, it is a decision that is only likely to get harder.

But, with the Reserve Bank of Australia indicating that it does not plan to lift or cut the official cash rate any time soon, now is the perfect time to pick a strategy that will set you up for the best possible future.

■ Richard Windeyer is a mortgage broker with Mortgage Choice. His advice is general in nature and readers should seek their own professional advice before making any financial decisions. Phone: Richard Windeyer on 1800 01 LOAN.