We have the option of locking in for two years at 6.95%. Can I ask your opinion on whether this is a good move at this stage?
Many thanks
ShirleyI have only been investing for 7-8 years and always used fixed rates, mainly 5 yrs. The Bank has always won. So I would love to hear other opinions.
Firstly, I know 5/8 of stuff all about investment.
But, I am fairly proficient at maths. If you borrow $x and fix the rate at 0.5% higher than available variable rate, then after 6 months rates rise by 0.5%, then another 6 months later they rise again by 0.5%, then you have broken even against the variable rate. And this is after 1.0% rise in only 12 months. You may come out in front if rates hike to the moon, but how high are they likely to go?? (I honestly have no idea)
I to want to know what Yack is asking – Has anyone beaten the Bank by fixing rates?
Surely on balance of averages, the variable rate wins – or else Banks wouldn’t offer fixed rates ’cause they definitely wouldn’t want to be losing money on them…******
…emotion clouds good judgement but is a defining element of character.Indifference is right. Most people do not win against the bank.
Many people who fixed last year did come out better due to the recent rate rises.
I think fixing is of most benefit for those people who like to have some certainty in their financial arrangements. I am generally not a fan of fixing but I must admit I seized the opportunity to fix most of my loans last October and am pretty happy. I personally wouldn’t fix at todays rates but then neither would I try to dissuade anyone who planned to do so.
Cheers,
Simon Macks
Mortgage Broker
[email protected]
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.
Often a downside to fixing is when the fixed rate expires you’ve lost your negotiated discount on the variable.
Eg. i get a 0.05% discount of the vairiable for the term of the loan. If I fix I lose this forever, so to speak.Perhaps it can be renegotiated.MJK[V]
I’ve just found out that there is a $300 fee involved in fixing so I’m starting to feel it’s not worthwhile.
Variable is currently 7.07%, fixed 6.95% over two years. I need to do the sums but we will probably leave on variable.
Thanks for your comments.
Which lender Shirley?
Simon Macks
Mortgage Broker
[email protected]
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.
Hi Shirley,
6.9% sounds a bit high to me. Westpac has 6.65% for 2 years, and they’re one of the more expensive lenders.
LuckyoneThanks,
LuckyoneWe are with the NAB. This particular loan is our daughter’s – she had a ‘honeymoon’ 1 year rate of 5.49% on a $68000 loan which finished in October 03. The bank lost her request to refix at the time and the quoted rate is now 6.95% for either two or three years (with adjustments back to Oct as they admitted they’d lost her letter). She’s only 19, 1st property, so isn’t eligible for the Professional Choice package discounts.
Perhaps with the $300 fee we should advise her to keep it variable. What do you think?
She can’t get the Choice package as the loan is too small. It wouldn’t really be worth it anyway. The discount will be the same as the annual fee!
With this size loan any interest rate rise won’t be the end of the world. Even with four rate rises she will be only paying $13pw week more and I can’t see this happening in the immediate term. Even if it did it is just one less pizza pw – won’t hurt too much.
Maybe she should concentrate on knocking it over as fast as she can or buying another property!
One option is to just ask for the basic rate which is 6.56%.
Hope this helps,
Simon Macks
Mortgage Broker
[email protected]
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.
Thanks for your responses. We worked out the difference between the interest saved (between 6.95% fixed and current variable 7.07%) over two years and compared to the $300 fee to make the change, it’s not worth it.
The loan will be kept on variable interest with the hope that interest rates don’t rise too much in the near future!
Shirley
Shirley,
Had she not taken the honeymoon rate she would now be able to ask for the basic variable rate of 6.56%.
Unfortunately the honeymoon rates automatically revert to the standard variable.
Might be worth talking to your PB and seeing if he can switch it for you [
]Cheers,
Simon Macks
Mortgage Broker
[email protected]
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.
Another point to bear in mind is each individuals investing goals for the next year or 2 or 3(whatever term you’re looking at fixing it for).
If you’re looking to access equity and purchase more property over this term then a fixed rate mortgage will not allow you facilities such as a redraw to access that equity(or a limit is imposed).
Depends on each individual’s circumstances. I prefer to keep my loans variable for the flexibility alone to pounce on any deals when they come up.
At the same time there is also the possibility of a split with part fixed and part variable.
Brendon
Acute Mortgage Reductions
‘Better Finance for More Homes Sooner’Just a question, for fixed rates just say for 5 years, if you were to change to variable, theres just a fee is that right to change it over?
What I learnt yesterday, I know better for tommorrow – Dean
Kenshin,
There can be quite a large fee.
If rates have dropped and the lender is making a profit on your high rate there will be a big fee to switch.
If rates have gone up and the lender is making a loss on your low rate then there is no fee. Some lenders even pay you!
Hope this helps,
Simon Macks
Mortgage Broker
[email protected]
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.
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