I got the following from the Comm Bank web site
Fixed Interest Rate
You can choose fixed rates for periods of 1 – 5, 7, 10, or 15 years. They allow you to manage your loan repayments so you can budget for other financial priorities in your life.Am i seeing things…….15 yrs fixed – sounds good to me – your thoughts??????
WOW, at what interest rate was that for 15 years fixed?
Hi Yack,
have you also noticed that CBA, has also become much more leanant with their lending criteria, business loans down to 5.99% and fixed for up to 5 years, family home equity guarantees and there platinum cards with a minimal limit of $12k, dont know what it is but seem to be that CBA are now being the Oligopoly of the financial lending market…
Cheers,
sisOligopoly – from dictionary.com
A market condition in which sellers are so few that the actions of any one of them will materially affect price and have a measurable impact on competitors.
Sheeee I thought I was back in the dark lecture theatre at an economics lecture. Good to see loans like that – I think the US has something like that.
I would love to see a loan product where the upside is fixed ie. cannot go above that figure but you get advantages of decreases in rates. eg. fixed rate = 7.29% but if rates go down your rates too goes down.
Hi Yack,
this is an interesting topic,
…but what i would like to see is new term repayment loans…
not just offering the basic 30 years…
but repayment loans over 35 and 40 years… who ever does, will definetly steal a huge chunk of the market…
i know GE Mortgage Insurances offer it, but their rates are still to high…
Cheers,
sisWhat would the main benefit be of longer loan terms? Lesser repayments amount?
One a year is my plan!!
Turismo,
The only benefit here will be the security of knowing what your loan will cost for 15 years. Some people like this stability in their lives.
The negatives are several.
Less flexibility.
Possibility of being locked into a higher rate for a long time, and if so the break costs could be very high if you decide to sell or refinance.I would not choose this myself but I understand many would see it attractive.
Cheers,
Simon Macks
Mortgage Broker
http://www.mortgagehunter.com.au
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
I am almost tempted at 15 yrs – 7.75%. I get the .15 discount so at 7.6% its tempting. My kids will hopefully be in Uni then.
I did a 10 yr loan with NAB at 7.5% about 5 yrs ago. I am still behind but at that stage I was borrowing more than I thought I could afford and wanted some predictability. That property has more than doubled so I cant complain and I still dont intend to sell.
What if you have an aim of getting your IP’s paid off before 15 years, yack? And don’t fixed rates limit the amount one can pay off? (just asking this latter question- not sure of the answer)
Yack, if the RE market slows down to a large extent, the RB may reduce rates to reenergise activity.
But see me in 15 years, when you have your rates fixed, and mine have risen to 15% and I’ll do a rethink
kay henry
I dont know what the rates can be. With the Comm Bank you can make $10k extra repayments a year.
Its just a way of hedging my bets. We are at historical lows. So far my 10 yr loan has been in the banks favour.
I have a 5 yr loan due to expire in Aug. I am thinking of fixing that one as well. Maybe 10yrs. I am buy and hold. But could be 15 yrs.
I notice employment figures in the US were extremely high Friday their time. So there could be rate rises in the future there. The sharemarket may start to increase there as well.
Any other thoughts on this? It sounds pretty good to me. 15yrs fixed at 7.69%.
As interest pmts are my main expense, having the certainty would be good.
On quick observation Yack; it’s too long a period.
It may seem to be attractive in comparison to what you are currently paying, but 15 years in property investing is IMHO too long (that could equate to 2 cycles).
Anything could happen….
Jo
Hi all,
Interesting discussion……
I believe that over a 10 year period, that historically variable always works out cheaper.
I don’t think that I could plan to hold any IP for 15 years. My long term thinking is maybe 5 – 7 yrs, planning anything past that is in the “too hard basket”!
Del
My grey area for me is that at 7.69% for 15 yrs – sounds too good for me when you consider we are at levels close to 30 year lows. So surely its got to be good.
As for 15 yrs being too far out – you can still transfer the loan to a different property. ie. the security.
What do you mortgage brokers think?
I wouldn’t be looking that far out personally but it is a good point you make with the historical lows.
There would also be low break costs should the variable rate have moved higher by the time you might wish to close the facility.
I think if it suits your strategy then go for it.
Unfortunately as far as rate predictions go – my crystal ball is in for repairs [biggrin]
Simon Macks
Mortgage Broker
http://www.mortgagehunter.com.au
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Personally, I would never fix any of my loans again after being stung with high exit fees recently.
Circumstances change and 15 years is a bloddy long time. What happens if you want to sell the property? or move the loan to another bank with better lending criteria to withdraw equity etc. You could be hit with very high break costs.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
We did a study – no fixed rate borrower has been better off in the last 10 years (compared 3 and 5 year rates to variable over the last 10 years). The longer the terms the more the fixed rate borrower ended up paying.
The rate may look good but it is very likely that you will be worse off.
What happens if the property appreciates in value and you want to access equity? What happens if you want to do anything?
I have seen more clients lament choosing a fixed rate rather than being happy.
In my opinion, it sounds like a terrible idea.
Cheers
Stu
Hi Stuart,
Saw a similar piece of research in API – was that the same one as you are refering to?
If not that articles gave a similar answer albeit (from memory) there are a couple of brief windows in time when a fixer was better off. I would argue we have been in a ‘trending down’ period since the late eighties/early nineties and as such variable rates were falling.
It would be interesting to do a similar survey in a ‘trending upwards’ period to see what the result show then. That is not to say we are in upwards cycle now either.
For me I fixed (3 years) one of my loans in August last year at 6.06% – wish I did it for 5 at 6.19% (from memory). I’d suggest I will win that gamble but as you indicated with your research I am like the many others I am losing [bigeyes] with a couple of other loans.
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping. PM welcome.
Yack
I would love to see a loan product where the upside is fixed ie. cannot go above that figure but you get advantages of decreases in rates. eg. fixed rate = 7.29% but if rates go down your rates too goes down.There are products called “capped loans” which is what you are referring to. They are available in NZ, I am surprised you have not seen them in Oz.
If you fix for 15 years would that not restrict your ability to extract equity from that property to purchase others? Of course you can do it, but you would lose some of the flexibility you have with shorter term loans.
Think twice, act once
Cheers
JeffHere is the media release I did: http://www.prosolution.com.au/articles/fixed.pdf
Assuming you can get an interest rate = standard variable less 0.50% (and everyone can by using a basic variable) then there is no time when any fixed rate borrower was better off (over the past 10 years).
Cheers
Stu
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