Key Points
- Compare the interest rates of other banks with yours. Ask you bank if they can do a price match or offer you a lower rate.
- Expect cash rates to increase until May 2023.
- The First Home Buyer Choice is a scheme offered by the NSW to potential home owners looking to purchase properties worth up to $1.5 million.
'May PERAan' is SBS Filipino's podcast series featuring financial experts seeking to answer the most common questions about money and finances.
Listen to the interview
Paano mapapababa ang variable rate ng aking homeloan?
SBS Filipino
22/11/202211:08
"Don't just complain about interest rates increasing. There are ways you can negotiate for a better rate," mortgage broker Maria Papa shares.
Ask other banks about their rates
Papa shares that before you start negotiating with your bank, research on what other banks have to offer.
"If you find lower rates, inform your current bank and ask if they can do a price match or provide a lower rate.
"Banks will typically offer you something better because it's cheaper to retain you as a client than to look for new ones."
Variable rates versus fixed rates
Cash rates are currently at 2.85% and analysts project that rates will only increase further.
"Fixed rates are for, let's say, a year.
"Analysts project that the cash rate will go up by another 1%. So, lets say, cash rate is 3.85% next year. The variable rate next year is 5.85%.
"I say this without knowing someone's financial situation...but if you get a fixed rate in the low 5%, grab it.
Variable rates will continue to increase as cash rates increase.
Splitting
You can opt to split your loan between variable and fixed rates.
"Splitting doesn’t have to be 50-50. It can be 70-30. It really depends on your situation."
Papa shares that she would encourage a client that has surplus to put the extra money into their home loan.
"What that does is it pays off the loan faster.
"Let's say the client has a surplus of $50,000 a year. I would recommend to go variable with that amount because you can pay it off in a year. For the rest, go fixed.
Remember that with a fixed rate, you're limited by only $20,000 extra repayments.
Papa admits that a lot of her clients are acquiring fixed rates due to the fear of rising interest rates and monthly repayments.
"If you're opting for fixed, go for 1-3 years. Have a look at how you go and do research.
"Interest rates are expected to go up until next year, maybe until May because the RBA wants inflation to go down by 2-3%.
"Once inflation rates go down, cash rates will either settle or hopefully come down."
A note to first home buyers
Papa shares that those wanting to buy their first home might find that now is the best time to do so.
There are government schemes and grants currently being offered for first-home buyers.
"There's a stamp duty of $40,000 in Australia. In NSW, this lump sum can be paid of as an annual tax with the . This makes it easier on the pocket."
She says that low competition and grants by the government make acquiring a first home easier.
Also, banks are really aggressive at the moment.
"While banks used to only offer $2,000 for you to switch to them, now they can offer up to $3,000-$4000.
"But whether you opt for a fixed or variable rate, it's a good idea to have your home loan reviewed by either another bank or your mortgage broker."
Disclaimer: This article is for general information only. For specific financial advice, you should consider seeking independent legal, financial, taxation or other advice to check how the information here relates to your unique circumstances.
