What You Need To Know About Interest Rates And Loan Types

At Fountain Property Group we do our best to help our clients create wealth for themselves by investing in property. We are experts in our field and property investment is by far one of the most effective ways to move toward taking financial control of your future.

When you buy a property it pays to be well educated about your decisions in choosing the right investment as well as which is the best lender, amongst others. It also pays well to understand interest rates. While many home buyers know there are interest rates to be paid, some don’t know more than it affects their back pocket.

If you would like to know more about how interest rates work then keep reading in order to make a more informed choice about your home loan.

Decisions by the Reserve Bank of Australia

The board of the Reserve Bank of Australia (RBA), meet the first Tuesday of every month. In this meeting the official cash rate is discussed and what it should be. As a general rule, the rate will increase if the economy is possibly going to heat up or it will lower when the economy slows down.

When the rate of inflation is at the higher end of the scale it is not likely that there will be a cut to cash rates.

How the decision affects banks

If the RBA raises the cash rate the banks tend to follow suit and raise their interest rates, this rise will then flow down the line to affect your mortgage repayments.

A savvy investment property owner will pay close attention to the rates so that they can possibly negotiate with their bank for a better rate or consider looking elsewhere with another bank to re-finance. The rates will also affect your mortgage differently, depending on your loan type.

Standard variable home loan

Standard variable home loans can have features such as an offset account; a redraw facility, the option to make payments sooner if needed and flexible payment terms. This is the more common of the mortgage types although the one used most by first-home buyers is the basic variable loan.

Basic variable loan

The basic variable loan is just as the name states—basic. There are no features offered but it is cheaper than the standard variable loan. The payments on the basic variable are scheduled, so if you wish to close the loan early there may be a penalty to pay.

Fixed interest rates

The fixed interest rate is an option to take where the rate will be fixed or locked in for approximately one to five years. There is a gamble on this type of mortgage that means you may miss out on any cuts to rates but it also means you win if the rates are raised higher than your fixed rate.

At Fountain Property Group we are able to provide outstanding financial advice on top of our investment property sourcing services. To learn more about what we do and why you can put your faith in us, click here https://fountain.com.au/about-us/.