Switch from fixed rate to variable

[crc_error]

Does anyone know if you can switch from a fixed rate to variable rate?

I'm with the CBA and am wondering if its a option to me?

Also what would be the break cost.

I'm fixed at 8.90% however the current rate is 8.94 so slightly above my rate.

Also I noticed the CBA increased the wealth pack fee from $300 to $350 PA. thats a 17% price increase, and margin lending no longer gets a 25 pt discount.

 

[Bradsdad]

Early Repayment Adjustment
An Early Repayment Adjustment (ERA) and Administrative Fee (currently $50) will apply where borrowers repay their Fixed Rate Home/Investment Home Loan in part (except for the first $10,000 in additional repayments received in the year of prepayment) or full, during the fixed rate period.




Your PDS should have the calculation method for the ERA. I would suggest calling them and getting a quote on it however as this is by far the easiest option.


Regards
Steve

 

[crc_error]

since they are talking about interest rate drops, is it worth switching, or leave it alone?

I'm not to confident the rates will drop by much, so better stick to the fixed rates. what do you think?

 

[josko]

It all depends on your fees. Exit fees out of a fixed rate can be pretty hefty.

Find that out and you can think more about what to do. Ring your bank.

Regards Jo

 

[s_t]

When and why did you enter into a fixed rate in the first place? (you don't have to tell me - just something to think about) If the markets mood were to suddenly change to more rate increases (which could happen relatively quickly....) would you want to fix again?

 

[Bradsdad]

since they are talking about interest rate drops, is it worth switching, or leave it alone?

I'm not to confident the rates will drop by much, so better stick to the fixed rates. what do you think?

What have they quoted as a penalty?

It's a call a MB shouldn't really be making as there are never any guarantees on what will happen with rates. things you need to think about though would be things such as....

how long is left on your current fixed rate

Interest costs say at 0.25% and 0.50% lower that current rate VERSUS early repayment penalties. (MB can assist with this).

flexability of fixed rate V variable product i.e off-set availability, extra repayments.

 

[crc_error]

When and why did you enter into a fixed rate in the first place? (you don't have to tell me - just something to think about) If the markets mood were to suddenly change to more rate increases (which could happen relatively quickly....) would you want to fix again?

good point. I'm unlikely going to unfix, I was just wondering what the costs are, as when I asked the bank when I was signing up the loan, they couldn't give a straight answer, it sounded like it was sent to some back room and someone created a exit fee! I haven't called recently to ask cause I'm not planning to unfix, so no point in wasting the banks time.

Just wondering if someone here did it, and what did it cost them.

My reason for fixing was to have a constant repayment, and I didn't like the fact the bank could change their 'rates' at whim. I like to know my costs, not leaving them to chance. this hasn't changed, hence why I will unlikely unfix. As your right, the 'mood' can change, and all of the sudden rates go up again.

I really don't think rates will drop much at all.. all this hype is there so people start to think 'hey rates are going down, lets borrow money again' Banks are cashed up now, and need to lend out this money.. but they don't want to drop rates, just set hype of fit their agenda!

Our Wayne Swann indicated they expect the economy to kick again next year, so why would they lower rates when economy is picking up?

 

[Bradsdad]

good point. I'm unlikely going to unfix, I was just wondering what the costs are, as when I asked the bank when I was signing up the loan, they couldn't give a straight answer, it sounded like it was sent to some back room and someone created a exit fee! I haven't called recently to ask cause I'm not planning to unfix, so no point in wasting the banks time.

Just wondering if someone here did it, and what did it cost them.

My reason for fixing was to have a constant repayment, and I didn't like the fact the bank could change their 'rates' at whim. I like to know my costs, not leaving them to chance. this hasn't changed, hence why I will unlikely unfix. As your right, the 'mood' can change, and all of the sudden rates go up again.

I really don't think rates will drop much at all.. all this hype is there so people start to think 'hey rates are going down, lets borrow money again' Banks are cashed up now, and need to lend out this money.. but they don't want to drop rates, just set hype of fit their agenda!

Our Wayne Swann indicated they expect the economy to kick again next year, so why would they lower rates when economy is picking up?

There will be a complicated formulea for it.

Penalties will differ and may depend on the prevailing market rates and remaining fixed term.

 

[Peter_Tersteeg]

The loan variation fee quoted with the CBA's fixed loans is $600, the switching fee is quoted as $300 under the Mortgage Advantage Package (I assume the Wealth Package is the same). I don't know for certain which one would apply, but I'd guess it's the $300 switch.

There could also be break fees (as much as $700 with CBA).

Finally, there's the 'economic cost'. As your fixed rate is lower than the variable rate, this might be negligible, but it might not. Some lenders define this as the cost for them to re-invest the fixed rate funds elsewhere on the market, so the current interest rates may not dictate the actual cost.

The best way to get an answer is to call phone banking, explain what you want to do and ask them for the costs of doing so. They usually forward you to another department who will generate a specific quote. The people in the branch wouldn't be able to help you in this case.

 

[Jimmy255]

I'm a big fan of giving the bank what-for until you get your way. I know my loan manager pretty well, however that's never stopped me from getting fees waived, discounts etc. Be firm and not over the top with your requests and you'll find you can get your own way most of the time.

 

[jingo]

Does anyone know if you can switch from a fixed rate to variable rate?

I'm with the CBA and am wondering if its a option to me?

Also what would be the break cost.

I'm fixed at 8.90% however the current rate is 8.94 so slightly above my rate.

Also I noticed the CBA increased the wealth pack fee from $300 to $350 PA. thats a 17% price increase, and margin lending no longer gets a 25 pt discount.

Hi crc,

My wife and I were looking at this recently too. I have attached a sample letter from ANZ mortages which describes how they calculate their break fees.

We have one mortgage of $332,000 fixed at 8.09% until 2015. Our break fee would be around $15,000 for this loan!

I heard Shane Oliver tonight on the 7.30 report say that rates may drop to 5.25% by 2010.

But who really knows!

Regards Jason.

 

[Spectre]

If it were me...

I'd ring the bank or go in and ask them if there is an interest adjustment/what the amounts are.

Pretty sure that the money market rate isnt necessarily the interest rate you're being charged...

 

[crc_error]

Hi crc,

My wife and I were looking at this recently too. I have attached a sample letter from ANZ mortages which describes how they calculate their break fees.

We have one mortgage of $332,000 fixed at 8.09% until 2015. Our break fee would be around $15,000 for this loan!

I heard Shane Oliver tonight on the 7.30 report say that rates may drop to 5.25% by 2010.

But who really knows!

Regards Jason.

how can they be losing money on you breaking your loan? since your rate is well below the current fixed and variable rates? They would infact re-lend the money out at a larger amount.

 

[Gools]

Because if rates go to 6% then they will miss out on Jingo paying them an extra 2.09% for the next 7 years.

You would only change to save money (by expecting lower rates shortly), why would the bank just let you walk away from it?

 

[yo yo ma]

Also I noticed the CBA increased the wealth pack fee from $300 to $350 PA. thats a 17% price increase, and margin lending no longer gets a 25 pt discount.

Still competitive though, when compared to the others... They all offer different features, so you need to see which one suits you best.

ANZ Breakfree $340pa
St George Advantage Package $375pa
Commonwealth Wealth Package $350pa
Westpac Premier Advantage $395
NAB Choice Package $375pa
Suncorp- My Home Package $300pa

.

 

[crc_error]

Just to let you know, I unfixed my loan with CBA on Friday, and it only cost me $300.. it was a 10 year fixed rate with 9 years to go... there was no penalty as the current rate on Friday was 8.92% whereas my rate was 8.90%

I noticed on monday they dropped all the fixed rates, so now that they are below my rate, I would have paid a penalty fee!

Well timed!

 

[Bradsdad]

Just to let you know, I unfixed my loan with CBA on Friday, and it only cost me $300.. it was a 10 year fixed rate with 9 years to go... there was no penalty as the current rate on Friday was 8.92% whereas my rate was 8.90%

I noticed on monday they dropped all the fixed rates, so now that they are below my rate, I would have paid a penalty fee!

Well timed!

Glad you ended up asking them what the penalty would be

 

[josko]

Just to let you know, I unfixed my loan with CBA on Friday, and it only cost me $300.. it was a 10 year fixed rate with 9 years to go... there was no penalty as the current rate on Friday was 8.92% whereas my rate was 8.90%

I noticed on monday they dropped all the fixed rates, so now that they are below my rate, I would have paid a penalty fee!

Well timed!

OMG 10 years?

Good idea to unfix and thank goodness the break fee was only $300! I find that amazing. I thought break fees were huge on fixed loans.

Regards JO

 

[crc_error]

OMG 10 years?

Good idea to unfix and thank goodness the break fee was only $300! I find that amazing. I thought break fees were huge on fixed loans.

Regards JO

they are, but I was in the money and got out before the fixed rates were dropped before my rate.

If I wanted to break it today, after the fixed rates drop, I would be paying out thousands