Mortgage rates dropping means opportunity

Dropping rates means opportunity, particularly if you’ve got a mortgage.

Fixing your mortgage is taking a bet against the bank on rates. It’s a bet that the fixed rate will be better than the variable rate over the term you pick.

It’s a bet I’m yet to win.

The reason I’ve fixed in the past was certainty, costs are locked in so which makes planning more certain. Handy when you are growing your family for example and you don’t want to risk costs going up.

Things seem to have shifted recently. Banks are in a tight spot. The risk of people not paying their mortgages and other loans has risen on the back of Covid-19.

As a result, they are making massive allowances (measured in billions) for the impact on revenue, when they report to shareholders. What’s a smart way for a bank to be a bit more secure, avoid losing your business? Simple, offer you a great deal and lock you in. From what I’m seeing this is in the form of fixed-rate mortgages.

There are some unreal rates around at the moment and it may be a way to lower your costs. A client recently reduced their already low rate by 0.6%. On a $500k home loan for example that’s $3,000 saved per year. It may well be worth chatting to your bank or broker to see what your options are and if see if you can reduce your costs.

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