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Should I Lock In My Home Loan Rate?

Should I Lock In My Home Loan Rate?

Feb 14, 2022 | Interest rates

With interest rates at a record low and the threat of rates rising, there’s lots of talk about whether or not you should or shouldn’t lock in your interest rate.

As with every loan, there’s no hard or fast answer – but you may be interested to learn the pros and cons of fixed and variable rates to decide what is best for you.

What is a fixed rate?

A fixed rate loan is exactly that – a fixed rate. Once your rate is locked in, it stays that way for a certain period.

What are the benefits of a fixed rate home loan?

  • Rate rises won’t impact you
    If you expect interest rates to rise during your fixed rate period, you could save money on future repayments
  • Set and forget
    With a fixed rate you know exactly what your repayments will be for the loan period (usually 1-5 years)
  • Easier budgeting
    Because you know exactly what your repayment will be, budgeting and managing your cash flow is easier, giving you peace of mind.

What are the downsides of a fixed rate home loan?

  • The rate you apply for may not be what you get
    When approaching a lender for a fixed rate loan, remember that the rate you apply for may not be the rate you get when you settle on the loan. Some lenders will guarantee a certain fixed rate before settlement but a “rate lock fee” may apply.
  • Less flexibility
    Fixed rate loans limit your ability to pay off the loan faster by restricting additional repayments or capping them at a certain amount per year. Significant break fees may also apply if you want to refinance, sell your property or pay off your loan in full before the fixed term has ended.
  • Fewer features
    Many of the desirable features that come with a variable rate home loan aren’t available for fixed rate loan holders. Typically borrowers will not be able to redraw funds over the fixed period or link an offset account to their loan.
  • Rate cuts won’t impact you
    You won’t be impacted by rate rises, but you also won’t benefit from any cuts the lender makes to their home loan rates over the fixed term.

What is a variable rate home loan?

The most common home loan option, variable rate loans allow the lender to change their rates at any time – meaning your repayments may increase or decrease depending on what is happening.

What are the benefits of a variable rate home loan?

  • Repayment flexibility
    Variable rate loans allow for a wider range of repayment options, including the ability to pay off your loan faster without incurring interest rate break costs. Some variable rate loans also offer features like offset accounts or redraw facilities that work to reduce the loan balance you pay interest on, whilst still allowing you to access surplus funds
  • Easier to refinance
    If you find a better deal elsewhere, it’s easier to switch to a different lender or home loan product as you are unlikely to attract break costs.
  • If rates fall, you pay less
    Lenders will cut rates for a variety of reasons, mainly in response to reduced funding costs. If you’re on a variable rate, you’ll reap the benefits of lower repayments.

What are the downsides of a variable rate home loan?

  • If rates rise, you pay more
    Just as you pay less if rates fall, you’ll pay more when the rates rise. Lenders can change a variable interest rate at any time, meaning the rate will likely fluctuate over the life of your loan. If your bank raises rates, your repayments will also rise.
  • Less cash flow predictability
    With your repayments able to increase or decrease at any time, it’s harder to budget and predict your cash flow over the long run.

What is a split rate home loan?

Another option is to opt for a split rate loan. This allows you to hedge your bets on interest rates by splitting your home loan rate.

Many lenders offer the option to divide your home loan into multiple accounts, allowing you to take advantage of both fixed and variable rates.

What are the benefits of a split rate home loan?

  • Peace of mind
    Allocating a percentage of your loan to a fixed rate may give you more peace of mind that when the variable rates fluctuate you can still afford your monthly repayments.
  • More flexibility
    By keeping a proportion of your loan on a variable rate, you have the flexibility to benefit from offset or redraw capabilities on that portion of your loan. You can also take advantage of falling rates when they happen.

What is the best option for me?

A home loan is a long-term commitment – so it’s important to choose the right one for your needs. As your personal circumstances are likely to change throughout the life of your loan, it’s important to revisit the rate you pay at various points to ensure you’re getting a good deal and using your loan features or rate splits effectively.

Not sure what is right for you? That’s why we’re here. Our team will talk you through the different options and find the loan that best suits your unique needs.

Contact us today to find out how we could help.

What You Can Expect from the Sydney Housing Market in 2022

What You Can Expect from the Sydney Housing Market in 2022

Jan 18, 2022 | Property Market

It’s no secret that the last few years have been a bit of a rollercoaster.

Housing market booms, interest rates at an all-time low, pandemic induced lockdowns, protests, bushfires, floods, stock market crashes, housing booms – you name it, it feels like we’ve experienced it.

But what can you expect from the housing market in 2022? With prices continuing to climb, many are asking what will happen next. Can we expect an epic fall? Or will prices continue to soar?

Let’s have a look at what’s happened recently and what that means for the new year.

High demand = high property prices

Throughout 2020 and 2021, the property market has been a seller’s market, with buyers battling it out to secure properties.

At the end of 2021, homes were selling across the country with minimal negotiation and homes were selling an average of 23 days early. Auction clearance rates held strong at 70-80% across the major auction markets.

With competition at an all-time high, real estate agents were seeing offers coming in from buyers on the day of listing – often well above the list price in a desperate attempt to secure a property.

On auction day, buyers frantically bid well above the reserve to secure their “dream” property in a seller’s market where the right property was hard to come by.

With demand so high, prices just didn’t seem to stop rising – from the “starter” unit to modest family homes right through to multi-million dollar estates.

Could the property tables be turning?

But all hope is not lost. With December’s housing values increasing by only 1%, economists and property experts are speculating that 2022 could be a buyer’s market.

With a surge in property listings, the pressure is off for buyers whilst vendors cut prices to secure a sale.

What’s causing the property listing surge in Sydney?

In 2020 and 2021 we saw the temporary suspension of open houses and public auctions as states put “lockdown’ restrictions in place. With Omicron now in the picture, many experts are speculating that the potential threat of future lockdowns has convinced vendors to act quickly.

In addition to this, the continuation of the pandemic has forced the hand of many vendors, selling their properties to recoup lost income or to purchase a home that suits their new lifestyle.

What are Australian home buyers doing?

For many buyers, the last two years have been a waiting game. Waiting for the right property. Waiting for the right price

When speaking with local agents as well as our clients, we’re finding that buyers are now “biting the bullet” and getting serious about purchasing after missing out on properties, struggling to find the right property or waiting to see where the market would move.

What about housing affordability and deposits?

When the property market exploded, housing affordability tanked.

For young Australians, the dream of owning a home became harder to achieve with rising prices raising the barrier of entry for young people looking to secure their first home. It’s expected that the results of the most recent census will show that the homeownership rate is at an all-time low.

But it’s not just the property price that’s the problem – it’s the deposit. For many buyers, the home ownership dream is thrown aside because saving for a home deposit seems out of reach.

Luckily, there are options for young Australians looking to purchase their first home. From government grants to incentives from lenders, we’re working with first home buyers to secure their first home (or their tenth!) every day.

But what about interest rates?

With interest rates the lowest they have ever been, it seems everyone wants to know when they will rise – and every expert has their own opinion.

The truth is, even if interested rates rise earlier than expected, it will likely be a gradual process. This gradual rise will continue to support housing demand as the cost of debt is likely to remain well below long-term averages.

Looking to buy or sell property in 2022?

Whether you’re looking to purchase your first property, downsize your home and your mortgage or looking to refinance your loan to avoid paying too much in interest – we’re here to help.

Our team has the experience and skills to help you reach your financial goals in 2022. Get in touch with us today at [email protected]

Why using a mortgage broker is a smart way to go

Why using a mortgage broker is a smart way to go

Feb 12, 2018 | Investment Property, Purchasing

Whether you’re buying an investment property or your first home, you have a number of options when borrowing money. Going directly to your bank may feel like the easiest and best option.But is it? Home loan customers can make significant savings if they are prepared to look beyond their own bank and shop around. The best way to achieve this is to use a mortgage broker like Sanford Finance.

We provide you with real choice

Finding the best deal for you only comes from having a choice. Mortgage brokers work with multiple lenders to not only find the right deal but to keep competition alive amongst lenders. We use this competition to our advantage and as leverage to negotiate a better outcome for you – not the banks.

We’ll review your mortgage to ensure you’re getting the best deal

Whilst the Reserve Bank cash rate has remained steady at 1.5% for the past 6 months, this may not always be the case. Changes are always possible depending on the economic climate as are changes to the variable and fixed interest rates offered by lenders.

The current lending environment in Australia is highly competitive, and mortgage holders who are prepared to review their loan are able to obtain better interest rates, saving thousands of dollars a year. As mortgage brokers have access to a wider range of lenders, they can negotiate a much better outcome.

We walk you through the process – and the paperwork.

It’s a fact that lenders require a lot of financial information prior to approving a mortgage. But following up with the lenders and negotiating the best rate is difficult if you have no experience in lending. It’s a mortgage brokers job to manage this process for you, help you organise your paperwork, negotiate on your behalf and do all the legwork required to secure your mortgage.

Whilst the process of securing a mortgage may appear daunting, have a mortgage broker by your side makes it a whole lot easier.

If you’d like to discuss your situation contact us or call on (02) 9095 6888