Hi Steve
Just wondering what you think about fixing a loan. My husband is a little worried and wants to fix.
When we took out our first loan it was at a much higher rate but we now have nearly triple that loan and I am not sure whether to fix or not.
It will cost $300 to secure it. My thoughts are it would be have to be a minimum of two years to be worth the $300 and I don’t want to do it anymore then 2 years as you don’t know (goodness forbid) what is around the corner.
When I spoke to the bank our current rate was 6.57% and if I fix it for the two years it will come down to 6.39% and $300 to do it. I also read in the paper today that the reserve is going to meet again and it is likely for another hike.
Steve what light can you shead of fixing? Shannon
One idea is to consider a Pro Pack that will take 0.5% of the rate straight away.
Fixing is a very individual thing. I just fixed my latest purchase.
What is your loan size and who is it with?
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.
hi all
shannon
i usually have variable but over the past 6 months i’ve fixed a fair few loans, it is one less thing i need to worry about(interest rates), personally i don’t see the need to lift rates, The RBA has got it wrong before and may start lifting rates (thats what they are promising to do). but will they eventually come back who knows, the USA still isn’t out of the financial mess its in. so anythging can happen?
if it is causing concern play it safe and fix some of the loan.
regards westanMortgage Hunter – what is a “pro pack” that can take 0.5% off you rate?
To all…
I think this interest rate issue is all a SCAM!
I fixed my $200k loan @5.75% for 3 years back in August this year.
Before the RBA raised rates last week, all the banks (including mine) had silently creeped up their fixed and variable rates since July this year bit by bit. Now, the public will think it is normal for the banks to raise their rates AGAIN just because the RBA raised their official cash rate!
There was not one sceric of media since July this year that rates were in fact rising all the time!
Pity you Shannon (and the rest of the unaware public) who missed out on the rate differential to make fixing worth while…
Good LUCK!
Cameron
It may be some consolation to you, Shannon, to know that historically one would have been better off to remain with variable rather than a fixed rates.
Pisces133
G’day Mishjastol…
Over a 30 year period I have never fixed rates and never will. It can prove to be very misguide and an expensive form of insurane.
Go with the flow and stay Variable.
Cheers Bill
Bill O’Mara
Real Estate,Mortgages,Share Market Strategies.
[email protected]That’s interesting Bill, I’ve seen several articles indicating that you are better off staying on variable.
Personally I’ve only (up to now) fixed one loan, and it was a pain when I wanted to refinance (live and learn).Rod.
Cameron, it is to my knowledge that the banks ‘guess’ what the variable rate is going to be over the next few years, and price their fixed rates accordingly. So there has been speculation for a lot of this year that rates are going to rise, and so they just acted on that – and other information they have, like their size of loans etc. etc.
As Bill and others have said, the Banks always ‘win’ by convincing people to fix, and effectively getting a higher rate from them for those x years than the average variable.
Cheers
MelHi all,[
]
We are still recomending variable rates to our clients,however the choice is still up to them.
Whilst BIS Shrapnel are forcasting rates as high as 10% by 2006, they seem to be the only ones at the moment to predict this.
There seems to be no evidence thru various banks economic reports to suggest that this will occur at this time.Latest fixed term loan rates do not seem to support any evidence of such a high rise.
The longer a forcast period is then the more innacurate it becomes[If you can term them as accurate in the first place]. However they can be usful in identifying potential risks.
One of the downsides of fixing loans are break costs,this is more of a problem when interest rates are falling.The formula for working out this cost apears to be unknown, even to the banks.
Thi can be a problem to an active investor who may wish to refinance for further investments during the fixed term.
jscot, A prof pack is where a bank will bundle several loan types together and give a discount as a package.They can also be rafered to as portfolio loans or something similar.
Bill & PeterM I agree wholheartedly with you about the historical aspect of fixed versus variable ratesRegards
Bryce Inglis
[email protected]
http://www.ipal.com.auAs Bryce says a Professional Package is effective where the loan size warrants. If the half % discount is higher than the $300 annual fee then it is easy to do – there are other benefits too.
I normally advocate against fixed rates. I meet more people who regret the choice than I do those who are happy. But I just fixed a property which settled last wednesday for 5.89% over three years and I doubt I will regret that choice.
Cheers folks,
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.
Am I right in thinking that ifr you havew a fixed rate, you can’t make extra repayments on your mortgage? If so, that would be the deciding point for me. The inflexibility of not being able to pay the place off quicker is a bit of a dud deal.
Can anyone correct me on this? (Go on- you know you want to!)
kay henry [
]G’day Kay…
I’m sure you’re right.Over the years I have not come across too many people that were pleased they fixed their loans. Huge break costs as rates fall, inability to make extra payments.
In fixing rates you are asking the Bank to take the risk..and they don’t do anything for nothing.
Cheers
Bill
Bill O’Mara
Real Estate,Mortgages,Share Market Strategies.
[email protected]Hi Kay Henry,
Some lenders allow lump sum repayments on a fixed rate, eg ANZ maximum amount $5.000. or 5% of loan.Billfromoz has made a valid point with regards to break costs,
I think in the end the SANF will be the deciding factor for those that fix there rates.
Regards Steven.[email protected]
http://www.mobilemortgagemarket.com.au
Ph: 0402483216Kay,
This is the case with most fixed rate loans.
My fixed rate loan allows repayments of up to 20% of the Principal during the period with free redraw.
If you look hard enough you will find almost anything!
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.
The Juggernaught continues….
With all due respect, it seems that all of you have missed one important point when you choose to remain on a variable home loan mortgage rate …..INTEREST RATE CYCLES……
In case you are not aware, we have just seen (last 12 months) historical (40 year) lows. Rates are not going to get lower – so why remain on a ramping up interest rate…?
Yes, it is generally not good to fix rates for those who buy and sell property for short term capital gain – but the implicit nature of real estate investing is (and should be) long term and long term only.
One should realise that we have just seen a very rare event in interest rate cycles (40 year lows) and if one was tuned to the banking cycle, fixing your mortage rate surely is the only way to go….
In other times of the cycle, yes, I would leave my rate variable…but not at this stage…
Cameron
hi all
yes statistically speaking you would have been better off going with the variable rates. but these statistics were from a time when the rates were comming down. the future may be rising rates then clearly fixed rates will be the BIG winners. How can you go wrong with a fixed rate of 5.85% that is great why wouldn’t you go for it? i’m fixed at 6.19% with some of my mortagages and more than happy. anyway another point is the human element if people are worried take out one of the risks, it is cheap insurance. if you are heavily exposed to the property market why risk financial problems needlessly.
i have a feeling people like cameron and simon will prove to be the clever ones.
bye westanJust as a point, in the future I will be monitoring bank’s fixed rate rates over time instead of relying on what the RBA does.
In my opinion, what ever reaction (to fix or not to fix) is made after the RBA changes rates is too late….
Happy Debt servicing……
Cameron
hi johnny
in regard to your first post. i think you are mistaken in saying that the banks have lifted their variable rates since June, i don’t think there is any change because it is linked to the rate set by the RBA, however they do move fixed up and down depending on the outlook for interest rates so it is possibel for the banks to lower the fixed rate even if the RBA lifts rates.
i haven’t had any of my variable loans altered at all.
westanWestan,
RBA put rates up 0.25% last week. Most banks have followed with their variable rates.
Some of the smaller lenders try to hold off for a little while to pick up more clients but they usually follow suit sooner or later.
First rise for about 18 months though.
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.
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