Is now the time to lock in your mortgage rate?

Interest rates are at historically low levels right now and the outlook is for either stability or further cuts.

Fixed home loan rates are now reflecting this, with three-year rates now sitting up to 100 basis points lower than variable rates. Is now the time to fix your home loan rate?

Long term outlook on rates

It is very difficult to predict interest rate movements and even the most experienced economists can frequently get it wrong.

Over the long term, predicting interest rate movements can be difficult. World economic conditions in two years’ time are possibly going to be vastly different. Political and economic conditions change continuously.

Issues such as Brexit may make a difference. Similarly, the result of the US elections could lead to dramatically different global political conditions.

Australia continues to remain a standout from an economic perspective, with 25 years of positive growth.

Risk factor

Ultimately, whether you decide to fix your rate will depend on your personal circumstances and your attitude to risk.

If you like the certainty of paying a fixed amount off your home loan over a long time period, then fixing your rate could be an option.

If however you want the option to pay extra off your loan month to month, then a variable rate may be a more sensible decision. It’s worth consulting a qualified financial advisor to see what suits your personal circumstances.

Interest rates may be historically low, but getting access to those funds can be difficult. The Australian Prudential Regulatory Authority has told the banks that they need to significantly curb lending to investors.

This means that if you are looking to borrow to invest, the conditions that banks put on your loan will continue to be restrictive.

This can range from requiring a high loan to value ratio, to not lending at all on certain types of properties or in certain locations.

Owner occupiers are however seeing far more improved lending conditions and the restrictions put on investors generally do not apply for owner occupiers.

If you are looking to borrow to buy your own home, right now you have a lot more room to negotiate.