3 & 5 year fixed rates thread
- Thread starter JIT
- Start date
yes, if nothing changes then no probs, a fixed rate loan cant be topped up, but a new add on equity loan can usually be taken
ta
rolf
was told by my broker and Westpac that they do topups with fixed? Maximum $15k though
Sorry im no expert correct me if im wrong
Sorry im no expert correct me if im wrong
Yeah thats what we wish to do - to have a separate loan for top ups, as the funds are likely to be used for another purchase - it would help segregate.
While access to funds is a priority, an investor needs to look at many things. They may fix all, or only part of their portfolio. They may have put in place a LOC prior to fixing the remainder of the portfolio. The rate may be so good (4.99%) that they decide to fix, what they may have left variable otherwise. They may be winding down, and not need access to new funds......etc
Fixing means there is no uncertainty with the rate. Even a minor increase in rates can have a huge effect, the larger the amount of debt you carry. An increase of only 0.5% can mean an extra $5k in repayments for every $mil you owe.
In my own situation, I fixed half of my borrowings with Wesuck earlier @ 5.93%, now I'm fixing some more @ 5.59%. I've got plenty of funds, should the need arise through empty LOC's just sitting there. Plus I've got borrowings elsewhere, which are still sitting on variable.
If you want certainty, then fixing is fine. As I've said many times in this thread, there is a large pre-occupation with getting the 'optimal rate' which is nonsense in my view. Maybe it is my own bias but I prefer flexibility over rate certainty any day of the week. A few bps of difference to a rate is irrelevant.
I don't know. I'm not pre-occupied in getting the optimal rate. I was happy as a pig in mud with the whole lot sitting variable at sub 6%. But in having the whole lot on variable, you run the risk that rates will rise. I know, I hear you saying 'not bloody likely in this environment" but, hey, stranger things have happened. I usually have about half fixed & half variable.
All of my previous fixed rates had now rolled over into variable. The first lot I fixed because it was a rate I was happy to have for the next 3 years. I only did half, to keep some on variable. Now fixing the other half (of course the LOC's arent included in this). I'm not refinancing any of my Wesuck holdings, have drawn the equity out of them, so they aren't moving any time soon, and I'm also not selling any of them, so why not? If someone comes along and offers me a price I'd be silly not taking for any of them, then that's the risk I take, and I know that the liklihood of that happening is next to zip. I've also got enough 'spare', should I need to access funds as well.
I also agree that having flexibility is good, which, of course, is what you get with variable. I've still got a chunk of stuff on variable with another lender. That's not changing.
Now, this is where I disagree - to a point.
We've all got different circumstances, so it will be different for each of us. Some with minimal borrowings should be largely unaffected. If, however, you have large borrowings (especially if neg geared), this could hurt.
If rates rise, 1% increase over $1mil borrowings is going to cost an extra $10kpa. Some people may stuggle with this. If your borrowings is $2mil it increases to $20kpa. Ouch! If they then rose another 1%, that person with $2mil borrowings has to now cough up $40kpa extra.
OK, maybe that's a little extreme. But the point is, that it COULD happen. In fact, it HAS happened if you go back over time. Yes, we have low rates at the moment, but there really isn't any certainty that we will continue on low rates indefinately. I remember 17.5% interest rates, and I'm telling you that it HURTS. So, like all things in life, you do what you can to mitigate risks, and fixing rates is an insurance policy that mitigates the risks that rates will rise. Of course, you may miss out on lower rates, but hey, who cares, so long as the rate you fix at is manageable?
No, I know that, but often people just sit and wait. So, what may be 0.25% this month could raise to 0.5% the next month, and so on and so on. Large increases, or decreases for that matter, don't usually come as one large hit.
Except 17.5% can't happen again.
In fact the more price inflation we have in houses and the more housing increases as a percentage of income the less fluctuation we can have.
Peoples 17.5% interest rates hurt no more than the interest rates at 8.5-9.5% before the GFC, the houses were cheaper and there was a smaller percentage of income being spent on them.
Who says it can't happen again? I would hope that it doesn't, but that does not mean that things won't change at sometime in the future. I don't have a chrystal ball, do you?
And you are wrong! They hurt a heck of a lot MORE than the recent 8.5-9.5% rates. At 17.5%, I only had a PPOR. More recently I had over a $1mil in borrowings at the high rates. Neither were nice, but the 17.5% was the one that caused real pain. I was there through both of them. Were you?
The younger generations seem to think that things were easy back in the 80's. Yes, housing was cheaper, but incomes were also a lot less as well. As a percentage of income, expenses for food, clothing, furnture and cars were more too. It was not all sunshine and roses.
I phoned Westpac during the week & have now fixed half a dozen IP loans for 3 years at 5.59% also. Further to this they have also increased our variable rates discount to a full 1%.
I couldn't look a gift horse in the eye for too much longer. IMHO the time to act if you havent already done so is now.
I hope this helps.
I couldn't look a gift horse in the eye for too much longer. IMHO the time to act if you havent already done so is now.
I hope this helps.
If they ever hit 17.5% we won't have to worry.... Ill keep a spot for you next to my cardboard box in some park .... and we can huddle up with the other 80% of the population that will be in boxes with us to stay warm ...
I'm not saying that rates will go to double digits right now. What I am saying is that they have in the past, and that they MAY in the future. When, who knows? I can't see into the future.
I've been told in the past, because the VR was higher than the FR at the time, there would be no penalty fees.
