refinancing and interest rates

From: Gail H

Hi everyone,

I should know the answer to this, but can you refinance loan (in the sense of having home revalued to increase line of credit against property) when interest rates on the loan are fixed.

By the way, who is still fixing out there? Is three years at 6.75 good, or would you go 2 years are 6.45? Banks seem to have already built the imminent increases into their fixed loans. Medium range forecasts (for what they're worth) seem to be that this easing cycle will be a moderate one, and that rates shouldn't get up too high over the next couple of years. I'm wondering if the fixed rates are already getting a bit high. Any views?

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Reply: 1
From: Alan Hill


For what it's worth, I used to Fix(slapping myself around the face!!), but I don't anymore.

Does this mean fixing is wrong for everyone? No!

Every analysis I could get my hands on showed that in nearly all periods over the last 20 years you will pay more interest for a Fixed Loan than a Variable Loan over the medium term.

So why would you fix knowing it will cost you more in interest costs?

If you have access to funds to cover periods of higher interest rates than I really can't see why you would.

However, if you don't have access to such funds and an interest rate spike could really hurt, then Fixing your loan probably makes sense. It may cost you more, but think of it as a Insurance Premium to pay. Your better off having paid a few thousand more in interest and still having your Asset than skimping on the interest and losing your Asset!

Bit like my Life Insurance Premium I pay each year. Never have had a good return from that, but that's fine......I don't want them to have to pay it out anytime soon!

Congratulations on your Queensland purchases too!

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Reply: 2
From: Andrew G

Hi Gail,

I just re-fixed two separate IP loans for 2 years at 5.95% - I doubt very much that the variable rate will go down to below that, especially not now with most reports hinting that the RBA will increase its rates by .25% in the next fortnight, and more from there.....

I haven't had any issues with fixed so far. I am not partial to fixed or variable (my home loan is variable). I can't see how I can go wrong with 5.95% for two years tho ....

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Reply: 2.1
From: Gail H

Thanks guys.

Yes, I'm aware that fixing is a form of insurance, rather than profit maximisation, but I'm just wondering whether (in light of current forecasts) people think that the 3 and 5 year rates are getting a bit high.

Anyone know about the refinancing to increase line of credit when interest rate is fixed question?

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Reply: 2.1.1
From: Thorpey !

Hi Gail,

depending on your loan contract (it should state something about this), I would have thought refinancing is just that... refinancing. Interest rate, amount borrowed, loan term, fixed or not, etc.
I guess the boundaries of creativity, and friendship of lender,would be stretched if you wished to break the fixed term.
But if it only meant you raising the amount borrowed and keeping everything the same, I can't see why not. It's more interest for them. Just depends if they want to screw you for break fees or not.

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