Mortgage interest rates have been falling since the middle of 2024, bringing relief to many borrowers. Dropping interest rates also create opportunities to get ahead on your mortgage goals.
This is great time to review your home loan with your SHARE or Newpark adviser, who can help you explore personalised strategies to make the most of the current interest rate environment.
Here’s a quick guide to home loan strategies you could consider during this part of the interest rate cycle.
The big opportunity
Currently, it’s likely that when it comes time to refix your home loan, you may be able to roll on to a lower rate. That will mean that the minimum repayments required each fortnight or month will probably reduce. Your adviser can help you evaluate your repayment options and tailor a plan that suits your financial goals.
You may want to pay the lower minimum repayments that have resulted from the drop in interest rates and enjoy having a bit more space in your household budget.
Alternatively, you could keep your repayments the same as they currently are,potentially paying off your loan faster. You’ve already been able to make payments at that level, and it’s often easier to keep going rather than try to increase payments again later.
This can make a big difference to the term of your loan, and how much it costs overall.
Say, for example, you have $500,000 left on your loan and 25 years left to run. If you had been paying 7.78 percent – or about $874 a week, and you kept the payment at that level when your rate dropped to 5.99 percent, you could clear your loan seven years faster, according to Sorted’s calculator.
Review your structure
There are lots of potential ways to take advantage of the lower rates on offer.
Splitting your loan: At the moment, longer loan fixes are a bit cheaper than the shorter ones. If you’d like to take advantage of those cheaper, longer options, you could divide your loan into smaller bits and fix some for a shorter term, and some for longer. That way, you get the benefit of the lower interest rates, but also the flexibility to refix parts of your loan sooner, if rates fall.
What’s right for you will depend on your short and longer term objectives. Your SHARE or Newpark adviser can help you structure your loan in a way that is suitable for those objectives.
Additional payments: When your loan is up for refixing the rate, you could opt to make an additional payment. This can help power you towards paying down your loan much more quickly and paying less interest overall.
You can also usually make a payment even if your loan is on a fixed rate, but the lender may have a limit on how big that payment can be before a fee is charged. We can help you work out what the rules are for your loan.
Timing your loan refix: Sometimes people wonder whether it’s worth breaking a term to fix at a cheaper rate. You’ll usually be charged a break fee when rates have fallen, so this is something that needs to be weighed up carefully, and each case can be quite different.
Your SHARE or Newpark adviser can look at your options and determine what might be appropriate.
Think strategically
It can be easy to get caught up in the excitement of rates moving down – particularly when they’ve been high for a while!
However, it’s important to be strategic with your home loan planning and think about how your decisions now will get you closer to your long-term goals, rather than acting based on short-term factors. Working with your SHARE or Newpark adviser can help you ensure that your decisions align with your situation and objectives.
Like to talk?
If you are thinking about your next home loan move, we’re here to help. Our expert team of advisers can provide personalised recommendations and strategies tailored to your current financial situation and goals for the future.
Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.