Fixed interest rate home loan

With talk of rising interest rates, I'm wondering whether I should switch to a fixed interest rate home loan? What would you recommend?

I can't make any recommendations unless I know your exact circumstances but I can run you through the big issues you should consider before making the switch.

Experts like Mark Bouris from Wizard reckon that guessing what interest rates will do is a very tricky task. When home loans were 4.5%, the level was so low it was a no brainer but now we could be at the top of the interest rate cycle. Some economists think there are two 0.25% rises to go before cuts come in while other economists think rates are on hold before a cut comes. Make sure you know what it costs to break your current loan to switch. Remember, if you want to get out of a fixed loan, there are costs. So make sure you know what they are.

The best fixed rate for 3-years I found was 6.99% at Homepath, while the lowest variable rate was Ratebusters at 6.57%. However, all of the 5-year fixed rates were higher than 7%, which means banks think generally interest rates will rise over a 5 year period.

If you fear higher rates, then a fixed rate might help you sleep at nights. But you might kick yourself if they fall and you pay more. Money decisions are often a gamble.

Click here to visit Peter Switzer's website