first-home buyer wants to know which is best – flexi or fixed interest on a
homeloan? He writes:
What is the
current interest rate for home loans? And what is considered a good rate given
Which is the better option: flexi or fixed rate?
FedGroup Property Consultant Slento Little
the interest rate you are offered is based on the size of your home loan. A
good interest rate in the current market is prime. Previously, home loan
applicants would enjoy as much as a prime -2.
the current prime interest rate level has resulted in a lack of appetite from
the banks to provide below prime.
deciding between a flexi (known as a
variable rate) and a fixed rate, you need to take your appetite for risk into
rate fluctuates. It is linked to the prime lending rate. A change in the prime
lending rate will result in a proportional change in the interest that you
this means that you would receive the benefit of a cut in interest rates, but
by the same token, you would also be subjected to the full impact of any
increase in the rate.
rate gives you the benefit of knowing what your instalment is for a fixed
period of time, regardless of the prime lending rate. Fixing your rate comes at a price, as the
lenders increase the rate provided to the applicant to absorb the bank’s
in a fixed rate is that it provides you with peace of mind. Households on a
tight budget, with little anticipation of increased income, will benefit from
the certainty provided by a fixed rate.
moment, interest rates are low. The possibility of them being increased
significantly in the short term is unlikely because of the position of the
economy on a global scale.
who have an appetite for risk are encouraged to opt for a flexi rate and thus
take advantage of the lower interest rate environment.
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