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Fight rising rates with a fixed rate lock in |
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Tuesday, 27 March 2007 |
Even when you are applying for a fixed loan the interest rate that is generally applicable is the current rate on the settlement day of your loan. So if an interest increase is looming how can you second guess the market and lock down a great rate? With a rate lock.
A rate lock is an option that most lenders will offer with their fixed rate loans. It generally attracts an additional fee but if an interest rate increase is looming it is a small price to pay for the 0.25% increase that you may suffer without using a rate lock facility. Rate lock simply means that from the moment you apply for finance your interest rate is locked in until the end of your fixed rate term. This is different from most normal fixed rate loans. Most normal fixed rate loans apply their fixed rate on the day of settlement of your loan. If you were applying for finance at today's rates of 7.19% fixed for 3 years settlement may not take place until another 4 weeks. So if an interest rate increase was to happen before your loan settled your rate may well be higher than you anticipated. If you are in the process of sourcing finance it may well pay to ask your financial institution if they offer rate lock facilities. 
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