Is anyone fixing their loans?

[crc_error]

why would you fix for over 7% since its about the long term average.

And those who are claping their hands for fixing at 4.99% for 3 years need to remember 3 years is a very short time. I wouldn't bother fixing for anything less than 5 years, but then again you pay for it!!!

You also need to remember 80% of the time when you fix, the bank wins.

So the only reason why you would fix is for 'insurance' purposes, not to beat the banks.

 

[wylie]

So the only reason why you would fix is for 'insurance' purposes, not to beat the banks.

Don't forget it is used as a strategy so that you can bring your expenses into this financial year.

 

[crc_error]

Don't forget it is used as a strategy so that you can bring your expenses into this financial year.

yes, you can pre-pay interest as well.

 

[pickle pickle]

who's offering 7.05% fixed for 10years?

Personally I'm considering fixed rates for next purchase from risk mgmt perspective. The above sounds attractive.

It was RAMS. However this was when interest rates were at there lowest.

 

[Ms Jade]

It was RAMS. However this was when interest rates were at there lowest.

Not quite. A year ago RAMS had 10 years for 6.19%.

 

[--(< PJ >)--]

I've had mixed results. My 5.99% 3ry fixed rate is pretty good, but the 8.14% one isn't (a mistake - pity I hadn't known of the 7% rule!). The variable one is working out ok.

I think it depends on the product (i.e. the type of IP, with vacancy rate risks, prospects of rental income growth etc), time of the market, and your own circumstances.

I prefer control over repayments. Certainty. But then, a financial planner once told me I have the risk profile of a Grandma.

Right now, I'd consider 7.15% fixed as reasonable. I haven't decided which way to go with the property I'm buying at the moment, so it's good to see where other people sit on the issue.

 

[letiha]

We were lucky enough to lock one loan in for 4.99% for 3 years and have 20 months left on that, the other loans are variable.

 

[DanielG]

I just assume the median interest rate is 8% and budget my finances accordingly, even if they are lower.

 

[RumpledElf]

Fixing would make the budget easier but we hope to sell this year.

All these interest rate rises have meant that the rent on house A doesn't pay the mortgage for house B anymore and we actually have to budget for it now - right when my pay is about to drop. C'est la vie.

 

[little_stranger]

You also need to remember 80% of the time when you fix, the bank wins.

So the only reason why you would fix is for 'insurance' purposes, not to beat the banks.

I work for a bank and I totally agree about not trying to bet against the banks with interest rates, as you lose out in the majority of cases. I don't have that much faith in my predictive abilities!

In line with some of the earlier posts, my preference is to go variable, but you need to ask whether I could bear an interest rate of at least 2% (or more if you feel you need to). I would fix if my situation really demanded it e.g. I had some other fixed expenses I had to meet etc. Of course there's a premium to pay for certainty. Also acknowledge there's benefits in pre-paying.

I had friends who fixed in late 2007/early 2008 as rates approached their last peak, because they "couldn't stand the thought of more rate rises". Human nature being what it is, this was not long before rates fell (it's darkest before dawn). They lost out by many thousands I had another person telling me to fix my rates too, and they couldn't understand when I tried to explain it why I didn't, but they had never bought a property .

 

[JIT]

Lots of people may have missed the fixed rate bottom last year, but to be honest, there was almost a precise day that you could have picked it if you were ready, watching and waiting.

See post #39 on 17/4/09 in this thread last year by keithj soon after the NAB upwards rate move on 14/4/09 (we'll call this the bottom day):

http://www.somersoft.com/forums/showthread.php?t=51571&page=3

 

[Token Funder]

Though it is generally true that you won't "beat" the banks by taking a fixed rate (hence my oft-stated maxim of fixed for certainty, variable for value), I worry that the figures tossed around in the context of those discussions can create a false impression of what variable rates have done in the past.

The fact that the analysis of a particular period suggests you would only be better off if you fix at rates below, say, 7%, shouldn't be taken to mean that 7% is some indication of the average of SVR.

So, just as a reminder:

Average SVR since 1959 : 8.81%
Average SVR since 1970 : 9.75%
Average SVR since 1980 : 10.11%
Average SVR since 1990 : 8.58%
Average SVR since 2000 : 7.25%

 

[MTR]

I never fix rates, I don't really see much point, especially if you are trading property.

Cheers, MTR

 

[Sunfish]

The A$ dipped today because the market interpreted a statement by Stevens today that rates are "near average". (I think that's what he said).

 

[Brett IP]

Fixed rates are just that, fixed. So much can change in the fixed period, apart from the usual up and down movement of variable rates. So the longer the period the longer the risk. Unless you do get a ridiculously good rate & fix for a short to medium term of say up to 3 years, then in my opinion, its not worth it. This is just my opinion, everyone has one.

My friend asked for advice when SVR's were around 8% and I told her not to lock no matter what because she didnt have too financially, well she locked at 8.75% for 5 years . Feel sorry for her but plenty of people in that boat I suppose.

One thing is if you had to sell the property (divorce, money problems etc) you would be up for massive exit fees, well usually.

In saying that I fixed when westpac was 5.19% for 3 years, very happy with it because it was so low and I knew it couldnt get much lower. At the time it gave us financial certainty which we needed, otherwise Im very much a fan of variable.

The thing I like with variable is the option to chop and change as you see fit in many cases. A certain bank was not performing so I changed for a whole $200 (i saved that in 1 month with the lower rate on the new loan).

On that note, are we allowed to ask for opinions on specific banks on this site?

 

[Ms Jade]

On that note, are we allowed to ask for opinions on specific banks on this site?

Sure, we talk about banks all the time.

BTW, FWIW I think the longer the fix the less risk, as you are insuring against the potential for 'sending you bust' rates for longer. I have almost always fixed for 5 yrs. It gives a long, boring SANF. (I have been on the internet too long. Much too old to be communicating with all these acronyms!) You'll be shocked to know that i have a big bunch of money fixed for 10 years. Makes it v. easy for me to plan my repayments, gearing etc into the future.