Interest Rate Predictions for 2015
This week two industry heavyweights predicted that the next move for interest rates would be down.
ANZ’s Chief Economist, Warren Hogan, said “Weaker growth and lower inflation in 2015 will provide the RBA with a reason and the scope to take the cash rate down 50 basis points to 2.00 per cent over the first half of the year.” While his counterpart at Westpac, Bill Evans, said “I don’t think that there is any doubt that they will cut rates in the first half of this year, it is just a matter of picking the timing.”
Another economist, AMP’s Shane Oliver, explained fixed-rate funding costs have been falling alongside wholesale borrowing rates and, as a result, “last year, that started to drive five-year borrowing mortgage rates below the five per cent level and that’s still continuing.”
So, with variable rates likely to drop further but with fixed rates at record lows, should borrowers take a chance of a rate cut or lock in fixed deals that are phenomenally cheap by historical standard?
Generally speaking, borrowers on variable loans are financially better off over the lifetime of a loan than those who are on fixed rates. But sometimes there is more to it than this, sometimes borrowers want the peace of mind of knowing what their home loan repayments will be – something that only a fixed rate offers.
Ultimately, it is a personal call on what is best for a borrower. If you want to be financially better off and are prepared to face the risk on repayment fluctuations then variable rates are best for you. But, if you want peace-of-mind then fixed rates are the way to go.
Splitting your loan however, is another alternative which allows you to hedge your bets. With a split loan, part of it is fixed and part is variable. Hopefully that offers borrowers the best of both worlds, especially when some lenders offer the chance for multiple splits. So, part of your loan will be variable and, say, another part will be fixed for three years while another will be fixed for five years.
To find out how Chan & Naylor Finance can help with which type of loan is best for you, please go to our website http://www.chan-naylor.com.au/services/finance/ and fill out a contact form or call us on 1300 306 767 for further information about how we can assist to get the right home loan for you.
Graeme Salt – National Client Finance Manager, Chan & Naylor Finance Australia
Disclaimer: This article contains general information. Before you make any financial or investment decision you should seek professional advice to take into account your individual objectives, financial situation and individual needs.