Lock in your loans

Business and home owners who are thinking about locking in their loans should move fast. There are some good fixed rates available but prices are expected to rise, say accountants and experts in credit.

Earlier this week research group Cannex reported that more than 25% of all residential home loans were now fixed, and says that a shift away from variable home loans is a reflection of uncertainty and nervousness.

Greg Hayes, principle of accountants Hayes Knight, says for companies or home owners not heavily geared and where interest rates are not much of an issue, it might not be worth looking into.

If however you are more highly geared, then now is the time to look closely at locking in rates, he says. If a rise in interest rates of 1% is going to cause you financial stress and affect your relationships, then you should definitely look at locking them in. “It’s the comfort factor,” he says.

Christine Christian, chief executive of Dun & Bradstreet, says there is an expectation that interest rates will rise. “There are some really good offers around at the moment so it would be a good idea to lock in a portion of your loan.”

Ian Rogers, publisher of banking newsletter The Sheet, says he is thinking of fixing his home loan for the first time. “I have never done it before, but inflation is breaking out and US bond yields have started to rise in the last few days, so it is a good time to make a decision now.”

He says if you can find a cheap fixed rate it could be a good idea to lock-in in the next few days as prices might rise and there are some good deals around.

“I am 41 and have had a home loan since I was 28 – and I have never considered it before,” Rogers says.

So how about the saying: “Never bet against the bank?”

“That’s a tried and true saying,” says Christian. “But there are good offers.”

But of course, Rogers reminds us, you are counting on interest rates rising, which would not be the case if there was a world wide recession.