For the first time this cycle, the fixed-rates have dropped below standard variable rates. This is going to be a really enticing carrot that's been dangled in front of Aussie homeowners - But this carrot could be a costly one to bite at.
We've been observing the major banks over the last 2-3 months - A handful of lenders subtly dropped their 2- and 3-year fixed-rates into the 5's in July or early August which went largely unnoticed. Now within the last two weeks, major banks have joined the party. The difference being when they joined the pack, they made headlines across the nation and were celebrated for giving a lifeline to consumers.
For the first time this cycle, the fixed-rates have dropped below standard variable rates. This is going to be a really enticing carrot that's been dangled in front of Aussie homeowners - But this carrot could be a costly one to bite at.
It's great news that the fixed-rates have started to plummet, they've come down as much as 0.75% in just two weeks! But think about it. It's not unreasonable to believe that they'll continue to fall as the money market tries to predict or grapple with the possibility we might have tightened the economy too far. These headlines were displayed across the tabloids praising the market for the welcome relief- Which I believe was irresponsible journalism.
The articles failed to cover the possibility of people fixing too early, costing them thousands or even tens of thousands of dollars for making this mistake.
Think about this: If you fix your home loan rate in September 2024 at 5.65% for 3 years, that is great.. for now. But then 6-8 months later if variable rates follow their historic patterns, they'll fall below your newly fixed rate and you'll become trapped by a rate you can't break without paying exorbitant break costs.
You need to make sure you consider holding on a little longer, the market will keep falling, it has to in order to keep this economy in working order - And you don't want to be the one caught out.
