All Topics / Finance / Fixing Interest Rates?

Viewing 8 posts - 1 through 8 (of 8 total)
  • Profile photo of SamSavvaSamSavva
    Participant
    @samsavva
    Join Date: 2010
    Post Count: 12

    Hello,

    Im wondering if anyone has advise on perhaps locking in an interest rate for a new home loan used to purchase an investment property? As rates are quite low is this a wise idea?

    How much more do they cost to fix and do you lose benefits like offset accounts ect?

    Perhaps locking in half the rate?

    Any advice would be greatly appreciated.

    Thanks

    Profile photo of TheFinanceShopTheFinanceShop
    Participant
    @thefinanceshop
    Join Date: 2012
    Post Count: 1,271

    Part of the reason you fix rates is due to risk management and the other part relates to your IP strategy. No one can give you the right answer unless they spend at least an hour with understanding your risk profile which includes current and future goals. Speak to your banker or broker and ensure that they ask you plenty of questions before giving you a definite answer.

    TheFinanceShop | Elite Property Finance
    http://www.elitepropertyfinance.com
    Email Me | Phone Me

    Residential and Commercial Brokerage

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069

    Fixing is a good option if you need to know what your monthly repayments are going to be each month. So from a budgeting perspective – it can be great.

    The major downside is the high break costs generally associated with closing down a fixed loan and their lack of flexibility.

    If it's a set and forget IP that you don't plan on selling or extracting equity from anytime soon then fixing can be ok. If you do decide to fix and the lender doesn't allow you to access equity later on, then you'll either have to externally refinance to another lender which will incur break costs or stay with the current lender and forgo the equity release.

    If you think you might sell the property within the fixed period then avoid fixing.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of kong71286kong71286
    Participant
    @kong71286
    Join Date: 2009
    Post Count: 261

    Interest rates are quite low in comparison to what they have been historically, and the Reserve Bank of Australia still has a lot of room to slash interest rates depending on how things unfold economically.

    As Jamie and Shahin mentioned, whether you should fix interest rates or not will depend on your property strategy,  personal circumstances and whether you think interest rates are likely to increase or decrease.

    In my view it appears that interest rates are trending downwards, and I wouldn't lock in more than 50% until that downtrend shows signs of reversing.

    Profile photo of TheBishTheBish
    Participant
    @thebish
    Join Date: 2007
    Post Count: 59

    From a quick observation of the current fixed rates on a 3 year loan they now look to be a pretty good option I reckon. Its always difficult knowing where the rates will be in 12 months time but the Reserve Bank here is pretty stingy dropping the rates and for that reason and the fact there are some green shoots appearing in retail and housing I wouldn't be surprised if we are close to the bottom of the rate cycle or close to it.

      

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,018

    Bish, the Reserve Bank of Australia have cut interest rates over the last couple of years as when they deemed fit to ensure the Australian economy carried on moving forward.

    The difference is in 2012 is there is no corrolation between the RBA cash rate and the individual lenders variable rate.

    Lenders fund fixed rate loans in a different manner to variable rate loans and has been mentioned utilising a fixed rate strategy is an important risk mitigation strategy.

    Cheers

    Yours in Finance

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me | Phone Me

    0-40 Properties in a decade with a unencumbered portfolio value in excess of $40M. Ask me for a copy of my API Interview.

    Profile photo of SamSavvaSamSavva
    Participant
    @samsavva
    Join Date: 2010
    Post Count: 12

    Thanks to everyone who posted. Appreciate you all sharing your knowledge with me :)

    Profile photo of kong71286kong71286
    Participant
    @kong71286
    Join Date: 2009
    Post Count: 261
Viewing 8 posts - 1 through 8 (of 8 total)

You must be logged in to reply to this topic. If you don't have an account, you can register here.