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Fixed Rate Home Loans Gaining Appeal

April 13, 2012 | Comments: 0 | Views: 154

Uncertainty about lending rates is causing many Australian current and would-be homeowners to reconsider which home financing option is best for them. Recently the Reserve Bank of Australia held cash rates steady but despite that move, lenders still increased their rates. Because of this action a growing number of citizens are concerned that banks and other lenders won't follow the RBA's future rate decisions and, as a result, fixed-rate loans are gaining favor among borrowers.

Multiple Options

When looking for home financing, borrowers have a variety of options to consider, including interest rates, fees and the length of the term. Another crucial decision borrowers must make is whether to secure a variable-rate loan or one that has a fixed rate. With a variable rate, the interest rate can increase or decrease depending on the cash rate set by the RBA. On the other hand, the fixed-rate option locks in the interest rate for a certain number of years or the life of the mortgage.

The Draw of Fixed-Rate Financing

Today's economic climate is incredibly volatile. Countries around the world are still trying to dig their way out of recessions and there is still a good deal of uncertainty about possible fallout from the European sovereign debt crisis and its potential negative impact on the Australian economy. This has left people very nervous and hesitant to take risks. So when it comes to their homes, borrowers are looking for safety in their investments and understandably so. In turn, more and more borrowers are choosing the fixed-rate option so they'll have the comfort of knowing their monthly payments will stay consistent month after month.


If you're buying your first home, you can decide which financing option is right for you before you fill in the paperwork and sign on the dotted line. But what if you already have a variable rate and would like to change to a fixed rate? Don't worry. You still have options. The first thing to do is to talk to your lender to find out what rates and special terms they can offer. Sometimes lenders have preferred rates for existing customers.

The next step is to check out other lenders so you can comparison shop. Take into consideration rates, points and closing costs but make sure that you're comparing the same products. For example, comparing a 15-year term to a 30-year term is like comparing apples to bananas. It's also important to compare rates on the same day, as they fluctuate on a daily basis (and sometimes multiple times during a day).

While securing fixed-rate financing can lock you into a lower rate when rates increase, it also can keep you at a higher interest rate if rates decrease. The key is to determine what works best for your circumstances.

Tomorrow Finance provides tools to compare home loans from Australia's lenders. When you find the best home loan rates, you save!

Source: EzineArticles
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