Fixed Term Interest

[viphar]

I have a fixed interest term loan of 6.64% expiring in 2010. As all the banks are now lowering their fixed interest term eg 6.99% with 1 year term and the prediction is that there are further cuts to come - is it right time to switch now to variable rate as I have put my property on the market. If I do the switch now there is no penalty but if I sell the property say in Dec then the breakout fee can be huge - about $7000. It is also possible I might not be able to sell the property.

Thanks

Viphar

 

[silversands]

Hi

The answer to your question, depends on how comfortable you may be, if you do not sell your house and the i.r's are much higher than this rate in 2010, when you exit your current fixed rate?
Problem is, none of us know if they will be. If you break now, without penalty, you only have to worry about slightly higher variable rates, until you sell or until you refix when rates get down to a level that you are happy to lock away. Just my humble view of the situation.

This is not advice, it's just the reasoning we are using ourselves, at the moment to determine whether we should break our existing fixed rate of 7.3% - which does not expire til oct 2010. Only difference is our bank want nearly $5k to break.

Anyway all the best with your decision

 

[Toni]

We are in a similar position, we have 2 @ 6.99 expiring in 2010 and one @ 7.25 expiring 2012 We are really not sure what to do either.

Toni

 

[viphar]

Thanks Silversands. Much appreciated. I had a meeting with the bank and have decided to break the fixed term without any penalty. I have come to this decision as the IP is in good location and is sure to sell at a price I want.

Thanks

Viphar

 

[viphar]

Toni
Thanks. I have also 2. One @ 6.84 till 2011 and the other @ 6.64 till 2010. The IP I am selling is sure to sell as it is in a good location. I had a meeting with the bank and as there is no penalty at this stage, I have decided to switch over to variable. The worst that can happen is to pay high interest for 2 months. Much favourable than paying hefty penalty. My decision to sell is due to current financial crisis and I think worst is yet to come. Cask is king at the moment and when right time comes I will get back into IP - hopefully at a much lower interest rate.
Only my opinion.

Viphar