Gambling on interest rates? Don’t get caught out

For house hunters, particularly those looking to buy their first home, this year has presented unique opportunities to enter the housing market, with historically low interest rates for fixed-rate loans.


In response to the impacts of COVID-19, fixed rates with lenders around the country have plummeted, and together with state and federal support programs and policies such as the HomeBuilder grant, more people are snapping up the chance to take advantage of unprecedented rates.


Choosing to fix some or all of your loan is always a bit of a gamble. For many, it’s a valuable way to take advantage of good rates when they’re available, and to have some predictability and stability in your repayments. However, it of course means you don’t benefit when fluctuations in the market bring interest rate reductions.


With rates lower than they’ve ever been before, many buyers are wondering if there might still be more savings to come, with some holding out on securing finance in the hopes rates might drop even further.


However, some commentators and analysts are warning that there may never be a better time to enter the market. Commonwealth Bank raised the rate of its four-year fixed rate loan in March 2021, and some see this as a sign other lenders could follow suit .


To use an old gambling adage, you have to know when to hold them and know when to fold them. Could now be the best chance you have to secure a low interest rate and take advantage of savings?


If you want to find out more about fixed rate loans and discuss the best option for your

circumstances, get in touch with BFD Finance today and speak to one of our experts for advice.

Did you know? A word on rate locking


Rate locking is an option available on some fixed rate loans that allows you to secure the interest rate at its current level when you apply for finance. Usually, interest rates are fixed at the time of settlement, so if your settlement period is 90 days and rates rise or lower during this time, you take that gamble and keep that rate until the fixed term ends. Lenders typically charge a fee to lock interest rates and like any fixed rate loan, there is a risk that rates fall after you’ve fixed and you’re no longer able to benefit from that. However, rate locking can be an option when there is solid reason to believe rates will go up by the time you settle.