Forums / Getting Technical / Finance / Fixing Interest Rates.. How many years?

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  • Profile photo of Stevie2013Stevie2013
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    @stevie2013
    Join Date: 2013
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    Listening to the recent “Your Money Your Call” podcasts Ive decided it’s time to jump on fixing the interest rates before the bank beat me to it & begins raising.

    Assuming that I don’t intent on selling I’m interested to know if others out there that have fixed or or about to are locking in 2, 3 or 5 year fixed rates. The property professor on the panel is locking in his at 5 years… 3 seems to be the number I'm most comfortable with right now

    Thanks in advance!

    Profile photo of CatalystCatalyst
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    A lot can happen in 5 years.  Would you need to reval to withdraw equity for further purchases within in 5 years? Do you have enough money to cover in an emergency (lose your job etc).

    What's the rate comparison 2yr, 3yr, 5yr. That makes a difference too.

    Profile photo of Jamie MooreJamie Moore
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    I think it’s too hard to effectively plan 5 years in advance. Lots of things can happen during that time – including those mentioned by catalyst above.

    Personally I wouldn’t fix for longer than 3 years.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
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    Profile photo of Stevie2013Stevie2013
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    Thanks guys, with further research I'm deciding on a 80% Fixed / 20% Variable which should allow me the option of topping up the loan should re-valuations come back with sufficient equity for a further purchase in future. The properties are sitting neutral to positive CF now so fixing will give me the piece of mind that they will take care of themselves for the next 3 years.

    Catalyst the rates i'm looking at are 4.98% for 3 years, the only property i'm hesitant to fix for 3 years is the Gladstone inner city unit as we've seen the market snowballing backwards.. although optimistic in the medium to long term. Possibly maybe locking that one in on 2 years only at 4.88%

    Cheers

    Profile photo of PLCPLC
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    Stevie2013 wrote:
    Listening to the recent “Your Money Your Call” podcasts Ive decided it’s time to jump on fixing the interest rates before the bank beat me to it & begins raising.

    Assuming that I don’t intent on selling I’m interested to know if others out there that have fixed or or about to are locking in 2, 3 or 5 year fixed rates. The property professor on the panel is locking in his at 5 years… 3 seems to be the number I'm most comfortable with right now

    Thanks in advance!

    They have already beaten you. Fixed rates are a different beast to variable and lenders use different criteria to set them and are continuously adjusting them.

    Not to say that they aren't viable but your primary reason to fix shouldn't be to beat the banks.

    Cheers

    Tom

    PLC | Phoenix Loan Consulting
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    Profile photo of Colin RiceColin Rice
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    Three year max imo.

    Fixed rates are good for predictable repayments.

    Rarely see someone beating the banks via fixed rates (usually the opposite) but in saying that they are at 30 year lows and less than variable rates which is unusual. 

    Some banks have already pushed up fixed rates so maybe they know something the average punter doesnt? 

    Colin Rice | CDR Finance
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    Profile photo of Stevie2013Stevie2013
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    There is a sniff in the air one of the major banks are increasing their fixed rates this week, which is what i meant by jumping on or beating them to it & fixing before they increased. I'm using the assumption that as you say they know something we don't … but knowing my luck though is the U.S will crash next year & rates will continue to drop!

    Profile photo of Mgs4Mgs4
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    Hi All,

    Related questions, are banks normally waiving annual/initial fees for new loans at the moment? We recently got new loan which had an applicable annual fee but also a cash payment for new loans, some promotion offer.

    Also if you rate lock for 3 years, the property goes up in value and you want to tap the equity to say buy another IP, can you easily add another loan on the property instead of initiating break fees on the 3 year fixed loan? What is the easiest way to borrow additional debt against the property in this circumstances?

    Profile photo of Stevie2013Stevie2013
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    @stevie2013
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    Wstpac have just increased their 3 year fixed by 0.2%.. but the 2 year remains unchanged. Hmm so now the options if i fix are 4.89% for the 2 year vs the new rate of 5.19% for the 3 year. I'm assuming the 2 year with a split of 80/20 is the way to go??? which gives me the option of topping up if equity becomes available for a future purchase. 

    Looks like the banks are confirming we're at the bottom of interest reductions! 

    Profile photo of Colin RiceColin Rice
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    Mgs4 wrote:
    Hi All,

    Related questions, are banks normally waiving annual/initial fees for new loans at the moment? We recently got new loan which had an applicable annual fee but also a cash payment for new loans, some promotion offer.

    Also if you rate lock for 3 years, the property goes up in value and you want to tap the equity to say buy another IP, can you easily add another loan on the property instead of initiating break fees on the 3 year fixed loan? What is the easiest way to borrow additional debt against the property in this circumstances?

    NAB/Homeside have also increased thier fixed rates recently. 

    Most banks are waiving application fees but still charging the annual fee as the trade off is you get a discounted variable rate.

    CBA are offering $700 for a refinance from another bank and St George are offering $1250. 

    If your loan is fixed and you get it revalued and the property has increased you will be able to access the equity &increase the loan with a separate sub account/loan split to the existing fixed loan therefore avoiding break fees. 

    Colin Rice | CDR Finance
    http://cdrfinance.com.au/
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    Perth Based Mortgage Broker - Investment Property Finance Specialist | E: [email protected]

    Profile photo of Jamie MooreJamie Moore
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    Join Date: 2010
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    Just got a $1500 cashback for a couple of Westpac customers :-) Both were purchases – but applies to refinances as well.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
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    Profile photo of Mgs4Mgs4
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    @mgs4
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    FMS wrote:
    Mgs4 wrote:
    Hi All,

    Related questions, are banks normally waiving annual/initial fees for new loans at the moment? We recently got new loan which had an applicable annual fee but also a cash payment for new loans, some promotion offer.

    Also if you rate lock for 3 years, the property goes up in value and you want to tap the equity to say buy another IP, can you easily add another loan on the property instead of initiating break fees on the 3 year fixed loan? What is the easiest way to borrow additional debt against the property in this circumstances?

    NAB/Homeside have also increased thier fixed rates recently. 

    Most banks are waiving application fees but still charging the annual fee as the trade off is you get a discounted variable rate.

    CBA are offering $700 for a refinance from another bank and St George are offering $1250. 

    If your loan is fixed and you get it revalued and the property has increased you will be able to access the equity &increase the loan with a separate sub account/loan split to the existing fixed loan therefore avoiding break fees. 

    Hi FMS, thanks for the reply, not sure I get it entiry. 

    Lets say you've got house $100k, 80% LVR, 50/50 variable/fixed. Value then goes to $200k, could you just increase the variable up to hold LVR 80% at new value? Or how would a sub account/loan split work in this instance?

    Profile photo of Jamie MooreJamie Moore
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    @jamie-m
    Join Date: 2010
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    Hiya

    It just means that you can still access equity with a fixed loan but it just needs to be set up as a separate loan rather than an increase to the existing.

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
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    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of DaOneDaOne
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    @daone
    Join Date: 2008
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    Hi

    Based on the all the discussion in the forum, is it now time to fix rate for 2 or 3 yrs. I can not see reasons why the RBA will increase the rates. Increase in rate will affect the exchange rate, however signs of the residential property markets over heating is emerging

    DaOne | Oras Finance - Your Local Mortgage Broker
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    Profile photo of YadrusaYadrusa
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    @yadrusa
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    Fixed rates in the Wholesale Swap Market have already gone much higher than the Market benchmark variable BBSW rates.

    This is more a factor of speculation the US will wind back it's stimulus, rather than what's happening in our own economy.

    Banks are keeping their Retail Fixed Rates cheap as a method of keeping clients sticky.

    From a property investors point of view, the decision to fix or stay variable should be based on how long you intend to hold the asset.

    Given there shouldn't be a break cost if fixed rates go higher after you fix, there really isn't any risk of fixing for as long a term as possible.

    That is, as long as you believe the RBA O/N cash rate will return to normal in the next year or two. Now where's that crystal ball?

    Cheers

    Andy

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