I’ve been hearing stories and reading articles over the last couple of months on how the increases in interest rates is meaning that homeowners will be facing higher mortgage repayments – I understand the pinch that you all are facing with this situation, but there is one big thing that doesn’t make sense.
Here in the States, we have a couple of major types of mortgages – fixed rate and adjustable rate (also known as an ARM) – they are what they sound like. With an ARM, it can change rates generally around every 6 months, but sometimes (and this is what happened in the subprime situation) the rate will be locked in for a period of time, and then shoot up to a more “proper” rate after a few years.
Obviously, the fixed rate mortgage is self-explanatory. However, what I don’t get, and this is something that isn’t explained is this – why does an increase in interest rates mean an increase for, it would seem, all homeowners?
Is it possible to get a fixed-rate mortgage in Australia, or is it all based on following what CommBank, NAB, ANZ and the other banks are lending at for the current term?
Of course, I can answer my own questions by wandering the ABC website – apparently at least BankSA (part of St. George) do offer fixed rate loans. Then again, in the rest of the world, it might sound like every American homeowner is facing the bank’s chopping block, so maybe it’s not unprecedented…