When deciding to fix your interest rate, there is a fine line between protecting yourself versus getting locked into an undesirable situation. You might wonder if you should fix your interest rate for six months, one year or five years.
There is no simple answer to this question; however, mortgage brokers in Tauranga have a great deal of experience with these issues and can give some sound advice. Read on to learn more about the factors that influence the most beneficial period to fix your home loan for.
The Interest Rate Outlook For 2023
The current inflation rate is on the rise and currently sitting at 7.2%, and until the Reserve Bank can get this rate under control and reduced, we will continue to see interest rates rising over the next one year to 18 months. Local government spending, current labour market movements and global upheaval are increasing inflation worldwide, so it is unlikely that we will see relief any time soon.
Higher interest rates mean that mortgages become more expensive, placing an additional burden on homeowners. Simultaneously we see a decrease in profitability on investment properties. Currently, the five-year fixed rate is about 3% higher than it was a year ago, and the one-year fixed rate is just over 2% higher. In the current climate, mortgage brokers in Tauranga predict that further increases will follow.
So, with this in mind, what is one to do when deciding how long to fix the interest rate on a home loan?
Time to Consult The Experts
Before making any decisions on how long to fix your interest rate, you need to have a frank discussion with your mortgage broker in Tauranga. They will consider your “bigger picture” and not just look at your home loan in isolation.
Factors that may affect your ability to service your existing debt, like job prospects, salary adjustments, other debts and financial commitments and personal situations like pregnancy or education, must be considered. Even possible lump sum payments from bonuses or commissions should be included in the assessment.
Only once everything has been factored into the equation can decisions be made.
Get in touch with Simpler today for the best advice when deciding how long to fix your loan for. Our mortgage brokers in Tauranga have all the latest data at their fingertips and all the right questions to ask you. Let us help you to make this critical decision.