Locking IN Interest rates

[Evad]

Can anyone label the true Pros/cons of locking in my interest rate Please ?

 

[BoatBoy]

Stability

Dave

 

[Evad]

No what i mean is the rules as such. Why wouldnt u lock it in now for the full 30 year term. ( which im guessing u cant) . does it cost to do this. can u get out .
But thanks anyway Boat boy

 

[MarkB]

What Dave said is the major pro of having fixed rate loans.

The major con, as some people are discovering at the moment, is that when rates fall and you have locked yours in, the break costs can be horrendous.

 

[Peter_Tersteeg]

You know exactly what your repayments will be for a specific amount of time. This might save you money, but it might not.

Fixed loans lack flexibility. It can be very costly to change them after they're set up. Extra repayments are usually limited (to about $5,000) and redraw is usually non-existant.

The implications of this is that when rates are rising, people are happy that they're saving money. When rates drop suddenly (as they are now), people can pay more than they might have had to.

 

[BoatBoy]

The major con, as some people are discovering at the moment, is that when rates fall and you have locked yours in, the break costs can be horrendous.

We know all about that having recently, a few months back now, shelled out over $20k in break fees on some of ours

But, tacked onto the end of the loan it costs around $100/month(coming down) to service and gave us an additional $1600+/mth (going up) in actual cashflow.

We've forgotten about the initial break fee shock

Dave

 

[Property Meister]

I perfectly understand the pros and cons of a fixed rate,

but why on earth would someone lock their rates in about 2-4 years ago, at their peaks,

I see almost an article per day people complaining about fixing their rates at 8% or similar??? why on earth would you do this??

and then they have the courage to complain on national tv/paper that its somehow the government, bank, RBAs fault.

surely if you fixed your rates at 5% and variables increased to 10%, you are n't complaining about how good it is???

 

[Propertunity]

but why on earth would someone lock their rates in about 2-4 years ago, at their peaks,

No-one knew they were at their peak. Some of us still remember when rates were 18%.

I see almost an article per day people complaining about fixing their rates at 8% or similar??? why on earth would you do this??

Why would you complain? or why would you lock in at 8% when all the economists were saying that rates were going to go up?

 

[BoatBoy]

but why on earth would someone lock their rates in about 2-4 years ago, at their peaks,

Stability

Easy to see the peak in hindsight

Dave

 

[sparky23]

30 years but would be OTT, highly unlikely that you would want to keep the house for that length of time. Life has a way of changing as you work your way through it.