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Fixed mortgages are mortgages that are secured or pegged at a particular rate. This means that if the reserve bank increases or decreases the repo rate someone that has a fixed mortgage won’t be affected – your installment won’t increase or decrease.
Keep these essential things in mind when applying for a fixed mortgage:
1. Possible interest rate decreases
When looking at fixed mortgages you need to be mindful of the current interest rate trend. Are rates currently on a downward trend? Or are interest rates generally going up?
If interest rates are coming down, it wouldn’t be wise to opt for a fixed mortgage as you will lose out on cheaper interest rates and lower monthly repayments.
The opposite is also true.
2. High Fees to get out of a fixed mortgage
I you have already locked yourself into a fixed mortgage you may have difficulty getting out of it as usually there are high fees and certain restrictions applicable. Be sure to ask about the terms and conditions before signing and read your contract.
3. Fixed mortgages rates are higher
You should also be aware that fixed mortgages are locked in at higher rates than the prevailing prime interest rate. At the time of writing this article the prime interest rate is 10.5%, at typical 3 year fixed rate would currently be around 13.05%.
How does this affect you? If the current trend in interest rates is that it’s going up, and rates normally go up in 0.5% increments, it means that if you had a variable rate it would take you almost a year to get to 13.05%. That means that having a variable interest rate would still allow you to save as the rate goes up, rather than having a fixed interest rate.
Well, I know that is a lot for you to take in so I am happy to spend some time with you and answer any questions you have about fixed mortgages and making sure your home loan gets approved. You are welcome to contact my office at 086 110 6204 or send me a personal email at: info@gpfmortgage.co.za
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