By using rate lock, we just saved a client $27,000 over 5 years!
Interest rates can change dramatically, sometimes in the time from applying for a loan, and actually drawing the loan for a property purchase. Many borrowers are not aware that the fixed rate they see advertised is not the fixed rate they receive on the day of settlement i.e. in 6 weeks time.
A feature called “Rate Lock” is available with most Fixed Rate Loans. For a small fee of 0.15% of the loan amount, you are able to lock in your rate when you apply, and it lasts for up to 90 days allowing you to receive the rate that you were attracted to at the start.
Our most recent client locked in a 5 year fixed rate at 5.89%pa, and the new fixed rate for their loan on the day of settlement was 6.99%pa. That is a saving of 1.1%pa for the next 5 years ($5,500per year) – just by paying a small fee at the start ($750).
Our Plan Assist Mortgage Advisory Team are able to help your clients decide on whether Rate Lock is suitable for them. Call Plan Assist on 02 9449 2333 to discuss this feature and others loan features today.
The RBA has not closed the door on further rate cuts this year, according to the minutes of its Monetary Policy Meetings in June and July.
However, if inflation is heading below the 2 to 3% target, is there any pressure to reduce interest rates? No, and that’s what the money market rates are suggesting for the short term – no movement from the RBA in the next 6mths.
So…rates are staying put.
On the flip side, Chief Economists from two of the major banks last month published their opinion stating the official cash rate will fall by at least another 50 basis points in the coming 6 months. They reckon the threat of high unemployment will spook property investors, and the whole economy will need a boost.
So, according to the bank economists, rates are going down.
It seems no one is sure where short term interest rates are headed right now. Whatever happens, rates are at historical low levels, and if you find a good investment that earns you a good return, talk to Plan Assist on 02 9449 2333 to help consider loan funding at historically low rates.