Interest only, fixed or variable, or both?

Is it a good idea to fix your interest rate or keep it at a variable rate? This isn’t an easy question with a simple answer, and it depends entirely on your personal circumstances, your future expectations, and the various loan products and interest rates on offer at the time you take out your loan.

A fixed rate remains the same for a set period of time, whereas a variable will rise and fall with any market interest rate changes. In a fixed rate your mortgage repayments will stay the same, but in a variable rate these will fluctuate. But it’s also possible to combine both fixed and variable rates in a split loan. The choice you make should always be based on the benefits and savings you can gain over the long term.

Another option is to consider paying interest only for a period of time, instead of paying both interest and capital. This can be useful in a construction loan, where you have to pay for both the build and also your current accommodation.

If you have any questions on how to choose an interest rate, or want to discuss options for converting your current rate to a more cost effective rate, please give use an obligation free call.