Views on Fixing

[burty85]

Have three loans coming up out of a fixed rate (6.19%).
CBA: 300K
Rams: 196K
Rams: 196K

Rams loans will be variable rate of 5.1%
CBA loan will be 5.2%

Good savings on the change to variable rate, but are thinking of 3yr fixed rates. Staying with the same lenders as LMI will kill any savings to change loans at this stage.

Rams 3yr fix: 4.99%
CBA 3yr fix: 5.09% (CBA has told be to come in with a offer of a better rate and they will looking into matching Rams)

Before I lock in any rates, willing to listen to other opinions about if rates are still dropping, staying steady or on the way up.

Reason for fixing is to have consistence monthly repayments, plus I think the rates are pretty fair atm, just don't want to cut my self short, fixing last time cost me a few pennies.

Cheers,

 

[Brady]

Have three loans coming up out of a fixed rate (6.19%).
CBA: 300K
Rams: 196K
Rams: 196K

Rams loans will be variable rate of 5.1%
CBA loan will be 5.2%

Good savings on the change to variable rate, but are thinking of 3yr fixed rates. Staying with the same lenders as LMI will kill any savings to change loans at this stage.

Rams 3yr fix: 4.99%
CBA 3yr fix: 5.09% (CBA has told be to come in with a offer of a better rate and they will looking into matching Rams)

Before I lock in any rates, willing to listen to other opinions about if rates are still dropping, staying steady or on the way up.

Reason for fixing is to have consistence monthly repayments, plus I think the rates are pretty fair atm, just don't want to cut my self short, fixing last time cost me a few pennies.

Cheers,

I have fixed loans along with variable like to have a good mix depending on purpose.

Rate isn't the most important thing, so things you need to consider are...
- will you sell any of the properties in the next 3 years
- are you looking to refinance to another bank in next 3 years (LMI is issue now but will it be later)
- what are the current banks like with cash out if wanting to get some equity
- can you get a better variable rate on some of them (If CBA is <90% LVR I can say yes)
- you didn't mention anything about PPOR or IP but do you current offset, is this a feature you should have?

As for price matching with CBA rather then using RAMS try a major competitor, not saying that CBA won't price match RAMS but I've found best results matching with the big banks as it's there main competition.

 

[The Fence]

Wot Brady says above ^^^^.



Purpose, position, future.

 

[jonmardell]

As you mentioned consistency in payments is the main benefit to fix but there are some possible pitfalls above with some lenders. If fixing i prefer to do a little at a time so you dont have it all coming off at the same time. This is more about rate mitigation and effectively dollar cost averaging your rate.

Have three loans coming up out of a fixed rate (6.19%).
CBA: 300K
Rams: 196K
Rams: 196K

Rams loans will be variable rate of 5.1%
CBA loan will be 5.2%

Good savings on the change to variable rate, but are thinking of 3yr fixed rates. Staying with the same lenders as LMI will kill any savings to change loans at this stage.

Rams 3yr fix: 4.99%
CBA 3yr fix: 5.09% (CBA has told be to come in with a offer of a better rate and they will looking into matching Rams)

Before I lock in any rates, willing to listen to other opinions about if rates are still dropping, staying steady or on the way up.

Reason for fixing is to have consistence monthly repayments, plus I think the rates are pretty fair atm, just don't want to cut my self short, fixing last time cost me a few pennies.

Cheers,

 

[Arun Bhuta]

Refinance as option

What is LVR of all property together you own?

Can you think of moving to another lender with all properties?

Will you be interested in fixed with offset account?

 

[burty85]

Long term hold is my goal, no selling, not at this stage, still acquiring IP's

my two properties with Rams are very high with the LVR as the market has moved backwards a little. CBA is about 80% LVR... As for offsets, no point at the moment as I have a LOC with the CBA loan that I need to pay down first...

I like the idea of off setting the fixed loans...

 

[Peter_Tersteeg]

I like the idea of off setting the fixed loans...

It is a nice idea, but I'm fairly certain that RAMS don't have this ability and the CBA definitely doesn't.

To get this feature you'll need to refinance to a different lender. Given the LVR is over 80% for some of the properties you'd need to pay LMI again to move. This tends to get expensive and generally isn't worthwhile unless there's a greater strategy behind it.

You'd be better served by fixing most of the loans knowing you cannot have an offset account against these loans. I'd suggest leaving some of your loans with the CBA as variable so you can put an offset against that part.

 

[burty85]

I already toyed with the idea of moving all my loans to CBA, would have cost me approx 7k with LMI, that's about a years worth of savings dropping from 6.19% to 4.99% best off just staying with current lenders at this stage.

As I have stated before, offset is useless to me at then moment, I have a LOC that I need to pay down which is not tax deductible, this is my main focus, it was used to help buy and Reno but its also personal use too, royal mess lol... So with fixing at 3 years at approx 4.99% I should be saving 8-9k a year in interest, this will help lower my LOC.

Can anyone see rates going any more south, and if so what about the banks. How much will then then pass on the to the consumer...

 

[nww]

From SMH today.


New Zealand just raised its interest rates to fend off ''future inflation''. Now I'm not sure New Zealand is really the monetary policy leader of the world but it did kick off a murmur about the long-term low on world interest rates having passed, begging the question: "Should I fix my mortgage rate?"

I would never fix interest rates, not again. I have always got it wrong when I have. Or in other words, the banks have always got it right and I still have that rather uncomfortable ''just rooted'' feeling.

For me the arguments against fixing include:

■ You pay a significantly higher rate than the variable rate straight away, so you are putting yourself behind the eight ball from day one. To recover that immediate loss official rates have to rise very rapidly and ''surprise'' the banks. They rarely do.
.......


Marcus Padley is a stockbroker and the author of stock market newsletter Marcus Today. For a free trial see marcustoday.com.au.



Read more: http://www.smh.com.au/money/borrowi...g-your-rate-20140325-35er9.html#ixzz2x17WSZqu

 

[FelixL]

From SMH today.

Read more: http://www.smh.com.au/money/borrowi...g-your-rate-20140325-35er9.html#ixzz2x17WSZqu

You beat me to it posting the link nww, I wish I had read this article years ago...
every time I fixed interest rate in the past always come out worse off. The banks are too good at predicting interest rate cycles

 

[Peter_Tersteeg]

Marcus Padley is a stockbroker and the author of stock market newsletter Marcus Today. For a free trial see marcustoday.com.au.

Read more: http://www.smh.com.au/money/borrowi...g-your-rate-20140325-35er9.html#ixzz2x17WSZqu

Stock brokers are in my experience some of the worst people to take lending advice from. Some may be good or bad at what they do, but those I know (including my own brother) have very little clue about money lending.

Marcus doesn't appear to understand about the source of money for fixed rates (it's not the same as variable rates). Suggesting the banks always get it right at the expense of the customer demonstrates this. Banks aren't making a bet when they fix, only the borrower is. Banks make their money the moment the fixed rate commences, regardless of how the market behaves. Low fixed rates doesn't mean that banks believe rates will drop further, it means they're able to source cheap money and lock in a profit.

The point about risk is especially naive. Rates won't rise 10% in a year, if they do, stock up on food guns and ammo, because society is likely to collapse. Rates could rise 3% in a year and given how highly leveraged people are (especially compared to the 80s), this would put a significant percentage of borrowers into financial hardship. The amount of change required to hurt people is fairly small compared to historical figures.

Who here get's an unexpected financial windfall from time to time? Occasionally stockbrokers do, they're called whales. Most people get a bonus or tax return which is reasonably predictable.

The very valid argument made is that fixing removes flexibility. I've fixed some loans where I don't think flexibility is required, others I've kept variable.

At this point I think rates are still unpredictable. They will go up and they will go down, just don't ask when and in what order. Fixing is a very valid strategy to lock in your cash flow and your own profits (or losses). Don't fix to try make a bet against the banks. Consider the effects of rates going up or rates going down. Think about how you'd be financially in both cases and how you'd feel about it. Then make your decision.

 

[WattleIdo]

Thanks for that PT_Bear.

Also, I'm under the impression that credit unions, mutual banks etc are on the comeback and are competing fiercely with the banks.

Teachers Mutual Bank recently dropped their fixed rate to 4.49% for 3 years. Interest rates have been low for so long and apparently may stay that way for a while so they're able to win people over with the lowest rates around. All the management fees etc are much cheaper too.

Others seem to have dropped rates too - with the aim of winning over new business and locking in existing loans at such a competitive time.

Whether or not rates go lower seems to be up to the banks at this point (imo).

I've just fixed and now have more cashflow. The extra will go into my variable redraw (not enough properties to have sorted out LOC /offset yet).

 

[Peter_Tersteeg]

The teachers union fixed deal at 4.49% is definitely hard to go past.

This is actually a very good example of how fixed rates are funded. The money doesn't come from the Reserve Bank, it comes from other sources, including super funds. In Australia there is a massive amount of money sitting in union based super funds so the smaller union affiliated banks and credit unions are able to offer very competitive fixed rates.

Variable rates are heavily funded by the RBA and these smaller lenders don't have the same strength of scale in this area. The majority of mutual lenders variable rates are not even remotely competitive. The comparison rate on the deal quoted above is 5.39% which is very expensive.

These lenders are also very conservative and this is reflected in their credit criteria. Whilst they do have their niches, the list of things they won't do is quite long. Often they're simply not a good match for investors wanting to aggressively grow a portfolio.

There is far more to it than just the interest rate, especially for property investors.