|Australian interest rates December 2021||Data|
|Average variable mortgage interest rate||3.93%|
|Lowest variable rate available on Finder||1.82%|
|Average 3-year fixed mortgage interest rate||2.93%|
|Lowest 3-year fixed rate available on Finder||2.34%|
Herein, are variable interest rates safe?
A fixed rate is a safe choice, but the uncertainty of a variable rate could pay off. … Generally, fixed-rate student loans are a safer choice. Your student loan’s interest rate affects your monthly payment and how much interest you pay overall. Both fixed and variable interest rates have benefits and drawbacks.
Thereof, do variable rates ever go down?
Unlike fixed rates, which stay the same over the life of the loan, variable rates fluctuate over time. Because they can go up or down, variable rates entail more risk than fixed ones.
How are variable rates calculated?
A variable interest rate is based on a benchmark rate or index, such as the prime rate, published by the Wall Street Journal. When that index rises or falls, it affects the interest rate paid by the borrower. The benefit of a variable rate is that as it drops, so does the borrower’s interest payment.
The formula for figuring your new interest rate on a variable-rate loan is to add the interest rate index to your margin. The interest rate index is a measure of the current market interest rate, such as the Cost of Funds Index or the London Interbank Offered Rate (LIBOR).
Some adjust variable rates monthly, while others adjust every three months. Also, find out about the overall rate cap. Variable rates are often capped, but the caps can be as high as 25%. Rates typically start out lower than fixed rates.
A variable rate loan can result in a lower payment in the short-term but carries a risk that the rate could rise during the long-term and produce significantly higher payments. If you do not expect to keep the loan for a long time, then a variable rate may be the better choice.
One major drawback of variable rate loans is the prospect of higher payments. Your loan’s interest rate is tied to a financial index, which fluctuates periodically. If the index rises before your loan adjusts, your interest rate will also rise, which can result in significantly higher loan payments.
For example, let’s say that you want to borrow $5,000 to start a business. Company XYZ offeres you a variable interest rate loan at prime plus 5%. That means that the interest rate on the loan equals whatever the prime rate is, plus 5%. So if the prime rate is 4%, then your loan carries an interest rate of 9%.
The interest rate offered on a savings account is a standard variable rate, meaning it can change at any time. Some come with competitive ongoing bonus rates if you can meet the requirements, while other providers offer higher introductory interest rates for new customers which only last a few months.
Generally speaking, if interest rates are relatively low, but are about to increase, then it will be better to lock in your loan at that fixed rate. … On the other hand, if interest rates are on the decline, then it would be better to have a variable rate loan.
The main advantage of a variable interest rate is its flexibility. The alternative type of loan, which is fixed-rate, has more restrictive and limited features. With a variable rate loan, you can make extra repayments towards your mortgage which in turn will help you pay off your loan sooner.
South Africa Holds Key Interest Rate at 3.5%
The South African Reserve Bank unanimously voted to keep its benchmark repo rate unchanged at a record low of 3.5% during its September 2021 meeting, as expected.
Anything at or below 3% is an excellent mortgage rate. And the lower, your mortgage rate, the more money you can save over the life of the loan.