Comparison rate means nothing for fixed rates.
3 and 5 year fixed rate thread
- Thread starter lizzie
- Start date
Comparison rate means nothing for fixed rates.
comparison rates are based on a 150K loan term over 25 years. So for a fixed rate it takes into account the rest of the term after the fixed rate period at todays variable rate. The first thing you should ask is my loan amount 150K? and secondly am i going to have this loan in place for 25 years without making any changes?
I pull the trigger tomorrow on CBA's 3 year fixed. The best I could haggle is 5.24% for 3 years (advertised 5.29%). If I was still with CUA, I'd be pretty happy locking in for 5.10%. I couldn't get CBA to match it.
Will it go down? Hindsight will have the answer. I've come to peace with this rate. I wish all that are speculating the best
Will it go down? Hindsight will have the answer. I've come to peace with this rate. I wish all that are speculating the best
ME Bank is still 4.99% (comp. rate 5.66%) with free rate lock if you dont mind changing banks. depending on your loan size it could be a good saving.
http://www.theaustralian.com.au/news/fixed-interest-rates-fall-to-all-time-low-in-australia/story-e6frg6n6-1226620207327
FIXED interest rates have fallen to an all-time low - but most home loan customers are failing to take advantage.
Some financial institutions are offering three-year fixed rates below five per cent and experts believe they will not fall any lower.
By comparison, major lenders' standard variable rates are still averaging more than 5.7 per cent, even after the typical 0.7 per cent discount.
Yet the latest data from the Australian Bureau of Statistics shows only 12 per cent of customers who took out mortgages this year have fixed their loans, compared to more than 20 per cent who locked in a rate above 8 per cent in 2007 in the run-up to the global financial crisis.
Those currently on a variable interest rate are, in effect, betting it will not only fall lower than fixed offers - but that it will continue to fall.
For example, if in the next 18 months their variable rate was cut by 0.25 per cent three times to less than 5 per cent, there would still need to be three further cuts in the subsequent year and a half to make up for the additional interest costs incurred in the first 18 months.
This calculation does not take into fees. While some economists are forecasting further official rate cuts, HSBC economist Paul Bloxham said it was unlikely the Reserve Bank of Australia would reduce borrowing costs further the cash rate has remained at 3 per cent since December.
"In our view we don't think the RBA is going to cut the cash rate any further so you would think it is not an unreasonable time to be considering potential fixing," he said.
"Fixed rates certainly look very competitive at the moment relative to history."
If the average discounted variable rate remained unchanged, a household which had $300,000 would pay nearly $8000 more in interest over three years than a family that fixed at 4.99 per cent. Again, this calculation does not take into account fees.
ABS figures showed after the GFC customers steered away from fixed loans with just 5 per cent of new customers locking in rates in both 2009 and 2010.
But in recent years the numbers have slightly increased, 8 per cent of customers locked in rates in 2011 while 13 per cent locked in their loans in 2012.
1300HomeLoan managing director John Kolenda said it's unlikely fixed rates will dip further and borrowers should pounce.
"I think we're very close to bottom of the cycle with fixed rates," he said.
"There's certainly been some great pricing out there by some of the majors on fixed rates for two or three terms, we've seen anything from 4.79 per cent to 4.99 per cent, they are at all-time record lows.
"So there's all indications we're near the bottom of the rate cycle for fixed rates."
Mortgage Choice spokeswoman Belinda Williamson said they had seen as easing of customers fixing loans in the first quarter of 2013 compared to the March quarter last year.
The average percentage of fixed rate loans over the March quarter was 20.78 per cent of new loan approvals, she said.
This compared to 22.67 per cent during the same period in 2012.Ms Williamson said many customers could be holding off on fixing their loans in the hope rates would fall further.
Canstar analyst Mitchell Watson said a lower interest rate could save a home loan customers thousands of dollars across the term of their loan.
"Depending on the size of your mortgage, a one per cent difference in interest rate can equate to several thousand dollars variation in interest costs per annum," he said.
"Variable interest loans tend to be more popular in Australia but those who are currently shopping for a new mortgage might do well to consider locking in."
FIXED interest rates have fallen to an all-time low - but most home loan customers are failing to take advantage.
Some financial institutions are offering three-year fixed rates below five per cent and experts believe they will not fall any lower.
By comparison, major lenders' standard variable rates are still averaging more than 5.7 per cent, even after the typical 0.7 per cent discount.
Yet the latest data from the Australian Bureau of Statistics shows only 12 per cent of customers who took out mortgages this year have fixed their loans, compared to more than 20 per cent who locked in a rate above 8 per cent in 2007 in the run-up to the global financial crisis.
Those currently on a variable interest rate are, in effect, betting it will not only fall lower than fixed offers - but that it will continue to fall.
For example, if in the next 18 months their variable rate was cut by 0.25 per cent three times to less than 5 per cent, there would still need to be three further cuts in the subsequent year and a half to make up for the additional interest costs incurred in the first 18 months.
This calculation does not take into fees. While some economists are forecasting further official rate cuts, HSBC economist Paul Bloxham said it was unlikely the Reserve Bank of Australia would reduce borrowing costs further the cash rate has remained at 3 per cent since December.
"In our view we don't think the RBA is going to cut the cash rate any further so you would think it is not an unreasonable time to be considering potential fixing," he said.
"Fixed rates certainly look very competitive at the moment relative to history."
If the average discounted variable rate remained unchanged, a household which had $300,000 would pay nearly $8000 more in interest over three years than a family that fixed at 4.99 per cent. Again, this calculation does not take into account fees.
ABS figures showed after the GFC customers steered away from fixed loans with just 5 per cent of new customers locking in rates in both 2009 and 2010.
But in recent years the numbers have slightly increased, 8 per cent of customers locked in rates in 2011 while 13 per cent locked in their loans in 2012.
1300HomeLoan managing director John Kolenda said it's unlikely fixed rates will dip further and borrowers should pounce.
"I think we're very close to bottom of the cycle with fixed rates," he said.
"There's certainly been some great pricing out there by some of the majors on fixed rates for two or three terms, we've seen anything from 4.79 per cent to 4.99 per cent, they are at all-time record lows.
"So there's all indications we're near the bottom of the rate cycle for fixed rates."
Mortgage Choice spokeswoman Belinda Williamson said they had seen as easing of customers fixing loans in the first quarter of 2013 compared to the March quarter last year.
The average percentage of fixed rate loans over the March quarter was 20.78 per cent of new loan approvals, she said.
This compared to 22.67 per cent during the same period in 2012.Ms Williamson said many customers could be holding off on fixing their loans in the hope rates would fall further.
Canstar analyst Mitchell Watson said a lower interest rate could save a home loan customers thousands of dollars across the term of their loan.
"Depending on the size of your mortgage, a one per cent difference in interest rate can equate to several thousand dollars variation in interest costs per annum," he said.
"Variable interest loans tend to be more popular in Australia but those who are currently shopping for a new mortgage might do well to consider locking in."
There was some recently paid LMI thrown into the mix, so any savings disappeared quickly. I put my guessing cap on and made some assumptions and guesses resulting in locking in for 3 years. Otherwise the 4.99% for two years looked good. The extra 0.25% was my insurance against an increasing third year variable rate. Just pure guessing though. I've never picked the bottom but fixed rates have been good to me previously. Each to their own.
ok with the LMI being paid you made the right decision. No one can pick the bottom of the rate cycle so dont worry about that as their are other benefits to fixed rates.
Seriously don't know why people bother with them. lol.
may as well be 100% for all its worth to me... to fix they want to go thru a completely new loan app - life is too short. what is the logic for going thru a new loan app if your repayments are dropping?
System constraints ................oh sorry, thats not right, responsible lending : )
...........Seriously !!
Its the same fishbowl answer ST George used to give when asked why their old offset doesnt offset IO PPOR loans.
ta
rolf
How does one find out the payout figure to break an existing fixed loan. I haven't seen fixed rates like this since westpac's 4.99% years back and would like a slice of this pie.
BTW, my loan is with Westpac. What is westpac's current 3 yr fixed. Would I need to re-val the place when I payout the existing loan and fix immediately again on a lower rate.
BTW, my loan is with Westpac. What is westpac's current 3 yr fixed. Would I need to re-val the place when I payout the existing loan and fix immediately again on a lower rate.
You ring them. I can almost guarantee it wont be worth it though they have to make a $ you know 
Five year fixed rate.
Just wondering if there are many investors out there that have fixed their loans for five years? I have current ip loans to $1.6m paying 5.4 % variable, if I fix my loans for two years I would save $166 pw and if I fixed for 5 years it would cost me around $90 pw, if the rate went upto 7% (long term average) I would be up for another $533 pw which would be a struggle. My current strategy is to buy high yeild and growth properties allowing me to purchase as many properties as I can over the next five to ten years. Then because I hate the idea of paying capital gains tax and I enjoy renovating my plan is to retire (now 44) moving into some of those properties and renovating them to improve the value then move into the next one, etc. This should elevate paying CGT for six years and help me get the best price for my property. I then will sell down my portfolio untill I'm debt free.
Back to the question, because my strategy is to buy and hold for a five year minimum should I consider taking advantage of the low 5 year rate and remove the risk of high interest rates? Is there something that could hinder my strategy taking the five year fixed rate? Like refinancing to release equity to purchasing other properties? Will I be able to buy other ip's with other lender's? What if for some reason I have to sell a property within the fixed term can I get out? Is there any other pit falls to watch out for?
Just wondering if there are many investors out there that have fixed their loans for five years? I have current ip loans to $1.6m paying 5.4 % variable, if I fix my loans for two years I would save $166 pw and if I fixed for 5 years it would cost me around $90 pw, if the rate went upto 7% (long term average) I would be up for another $533 pw which would be a struggle. My current strategy is to buy high yeild and growth properties allowing me to purchase as many properties as I can over the next five to ten years. Then because I hate the idea of paying capital gains tax and I enjoy renovating my plan is to retire (now 44) moving into some of those properties and renovating them to improve the value then move into the next one, etc. This should elevate paying CGT for six years and help me get the best price for my property. I then will sell down my portfolio untill I'm debt free.
Back to the question, because my strategy is to buy and hold for a five year minimum should I consider taking advantage of the low 5 year rate and remove the risk of high interest rates? Is there something that could hinder my strategy taking the five year fixed rate? Like refinancing to release equity to purchasing other properties? Will I be able to buy other ip's with other lender's? What if for some reason I have to sell a property within the fixed term can I get out? Is there any other pit falls to watch out for?
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Just the big bad break fee unknowns. I had one client in about 2009 hit for $30k and abother for $15k odd. Both had locked in at around 9% and had sold properties when rates were at 6% ish. They had no choice but to pay it as had both entered into contracts to sell. I heard of rumors at the time of $100k + break costs.
Unlikely that rates would move that quickly normally but still as a risk management strategy it isn't great. I only recommend 2 or 3 years now.
Unlikely that rates would move that quickly normally but still as a risk management strategy it isn't great. I only recommend 2 or 3 years now.
with that strategy i would consider fixing the loans. You might want to consider a mixture of 3 and 5 year rates to balance it out. there is some 5 year fixed rates at 5.39% so it would be the same repayment as your variable.
Prime fodder for a while new thread.
Sounds like a really great strategy you have thought through which would be interesting to explore
As for the question. Fixing five years. Probably wouldn't fix all, but good risk management strategy for potential rate increases, if you did some.
This just stuck out to me. Maybe I'm reading it wrong, and if so, I apologise. But, moving into and out of an existing IP won't give you a clean slate as far as CGT is concerned. Especially when you're talking about multiple IPs and trying to dodge CGT on more than one at a time.
Only for that year or more you live there and even then you have to prove you are not doing all this to avoid CGT.
