Yes, your clients can switch from variable rates to fixed interest rates. However, there are pros and cons you should discuss with them before they make a move.
Benefits of fixing their interest rate
Fixed interest rates offer two critical benefits for your clients:
- They will know exactly how much their monthly repayments will be during the duration of the fixed term.
- Their interest rate won’t increase during the fixed period, even if interest rates rise.
These benefits may be great for your client, mainly if they are first-time homebuyers or struggle to maintain their budgets.
Cons of fixing their interest rate
If they want to switch back to a variable rate or sell their home before the end of the fixed term, they will have to pay a break fee, which could cost thousands of dollars. In addition, fixed-rate loans usually don’t allow borrowers to make extra repayments. With interest rates in Australia being so unpredictable, it is also possible that interest rates could drop. On a fixed-rate loan, your client could have to pay thousands of dollars more in interest than if they hadn’t switched from a variable rate.
While switching to a fixed interest rate may seem practical, they may end up paying more money because of application fees, refinancing fees, stamp fees, or discharge fees.
If your client wants to switch to a fixed-rate mortgage from a variable-rate mortgage, there are options available for them. At Mortgage Street, we can help them refinance their current home loan to one that better suits their needs and situation. We can help you compare loan products from thousands of different lenders. In addition, we can also help determine if switching to a fixed-rate loan will save them money in the long run or if they will end up paying more.