In recent months many homeowners have been keeping a close eye on the interest rate situation, wondering whether rates are going to keep falling or start rising again in the near future.
For the avoidance of doubt: we don’t have the answers either to the question of how interest rates are going to change over the coming months and years.
Nevertheless, there are a few underlying considerations that should be borne in mind: when is your mortgage due for renewal? If this date is in the foreseeable future, the additional costs to lock in an interest rate prematurely will be low or negligible.
It is also important to know what your future plans are for the property. If your home is possibly going to be passed on to your children, sold or used for another purpose in the near future, you will have different priorities compared to a situation in which you plan to continue living in your home for another 20 years or more.
Your own level of risk appetite also needs to be taken into account. At present, those prepared and able to afford to take greater risks should certainly consider a money market mortgage. But for those in search of budgeting certainty for as long as possible, a suitably long-term fixed-rate mortgage could well be the best option. For example, it is currently possible to obtain financing for terms of 25 years at a rate of well under 1%, even with relatively modest flat-rate exit fees. This lowers the amount of risk taken, even if unforeseen situations such as bereavement, divorce or financial hardship arise.
So it is well worth conducting a detailed analysis of your personal mortgage situation with a view to examining the options – and therefore also the potential savings – for the next few years. We will be delighted to assist you with this.
Konstantin Wyser, Partner