VIEWS: 3 PAGES: 1 POSTED ON: 5/3/2011
?From a steadily dropping home loan rate, the rates have started to increase in the last three months. Should you change over your variable home loan rate option to a fixed one? A fixed home loan rate option allows you to know the monthly amount that you will need to pay to service the loan amount along with the period of time till which you shall need to pay the amount to the exact last month. This is because in a fixed home loan rate option the interest rate is fixed irrespective of the manner in which it changes in the open market. On the other hand, a variable home loan rate is one that changes based on the money market or the cash rate set by the Reserve Bank of Australia. This means that if the home loan interest rates increase, you shall need to pay a higher amount or live with an extension of the tenure. Till recently, most Australians were opting for a variable home loan rate since the interest rates had been falling steadily during the recession or global crisis. It seemed like a good decision to take at that time. It is interesting to note that even at that stage about 24% of those who applied for loan in March 2008 chose the fixed home loan rate option. However, of late, the interest rates have been increasing and therefore those who had opted for a variable home loan rate option are now wondering whether they should change over to a fixed option. If you are one of them, do take all factors into consideration while you do so. This includes the extra fee that you may be charged for the transfer of the variable home loan rate to the fixed home loan rate option. Mel writes about home loan rate among other finance related topics.
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