Westpac Cut Fixed Rates

[Qlds007]

The following Home and Investment Property Loan fixed interest rates will be effective from Tuesday, 24 March 2009:


Term Current Rate
(Stand Alone)
% New Rate
(Stand Alone)
% New Rate
(Premier Advantage Package)
% Change
%
1 year 5.45 5.19 4.99 - 0.26
2 year 5.45 5.19 4.99 - 0.26
3 year 5.39 5.39 5.19 -
4 year 6.49 6.29 6.09 - 0.20
5 year 6.49 6.29 6.09 - 0.20
6 year (IPL only) 6.99 6.99 6.79 -
7 year 6.99 6.99 6.79 -
9 year (IPL only) 6.99 6.99 6.79 -
10 year 6.99 6.99 6.79 -
12 year (IPL only) 6.99 6.99 6.79 -

They have also increased their Interest only In Adavnce discounts.

Also you can now pay Maximum Extra Repayment Amount on Fixed Rates, currently $15k, now to a maximum of $25k over the fixed term.

 

[Ms Jade]

Now THAT'S the way to start a Monday morning. Thanks for the good news, Richard.

 

[Rob Williams]

I'm tempted by the 3 year deal. I've fixed for 5 in the past, but won't do that again.
What do others think?

 

[Propertunity]

I'm tempted by the 3 year deal. I've fixed for 5 in the past, but won't do that again.What do others think?

For me 3 years is too short. The GFC crisis might just be coming to an end (??) by then And the focus will be back on reigning in inflation and increasing IRs.

If I plan to hold my IPs forever - I'm happy with a 10 year fixed rate.

 

[Ms Jade]

I agree. 3 yr rates are usually a fair bit cheaper but I would not be using them now. I am looking to fix a couple at 5 though, and 1 property for 10 (the one property I'm determined never to sell). I like as long a rate insurance as possible, but this also depends on your exposure. The larger my $ exposure the longer I'll fix the loan for. This is almost counter-intuitive, as this means the more I'll pay on the fixed rate now.

 

[Rob Williams]

I see your points. For me, though, it's not just about the rate. I've found I lose a lot of flexibility through fixing. Especially if rates rise and your looking at break costs to refinance etc.

 

[keithj]

I'm tempted by the 3 year deal. I've fixed for 5 in the past, but won't do that again.
What do others think?

My view is that fixing for 3 yrs is the worst of all possible options. Look at anticipated variable rates for the next 18 months - the bank rate is expected to be well below the current rate for all that period. That means in order for you to break even, it will have to be well above the current rate.... and to come out ahead it'll have to be well above the current rate. I'm assuming here that the banks pass on most of the expected RBA cuts - if they don't then the RBA will have to move lower to have the desired effect.

IMO, the GFC isn't likely to be over in a hurry, so there's a reasonable probability that rates will be rising when you come off a 3 year rate. There's also a reasonable possibility of high inflation, which means high IRs. The 5 yr fixed rate is (StG at < 6%) looks v. tempting... you'd hope the GFC would be a distant memory in 5 years, and IRs would have been relatively high for a while and we'd be closer to the next downturn in rates.

10 & 15yr rates are at generational lows, if you're planning on keeping IP or PPOR forever, then it'd be sensible to fix at least some of your loans (at least to the value of your PPOR) for longer IMO.

It's easy to swap securities if you sell an IP/PPOR that has a fixed loan, and it's a no-brainer to keep some as variable if there's any chance of having $$$ to pay down loans. Break costs are likely to be minimal as fixed rates are more likely to be higher in a year or so's time.

 

[ffc1883_1996]

I'm tempted by the 3 year deal. I've fixed for 5 in the past, but won't do that again.
What do others think?

I think when you fix a loan you are taking on an uncosted and slightly unpredictable liability. This liability is known as “the break costs” and, though it does trend towards zero over the fixed rate term, it can severely impact your flexibility – or at least the cost of flexibility. The lender can (and will) use this liability against you if it suits them.

I, for one, will think long and hard before fixing loans in future – regardless of how attractive the deal may seem.

 

[Rob Williams]

I, for one, will think long and hard before fixing loans in future – regardless of how attractive the deal may seem.

Me, too. I'll still keep a mix of fixed and variable, but will structure the mix to provide more flexibility than I did previously. This is one lesson I think I had to learn the hard way. Before I experienced it, I just didn't get it.

 

[nonrecourse]

Banks are good at fixing

Banks win 19 times out of 20 with fixed rate. They have hedging in place for the one that the client doesn't lose on so they are still in the money the 5% of the time the client has a win. Its the banks golden rule. They make the rules because they have the gold

 

[Jamie_D]

I would wait a few more months before committing

Can't see fixed / variable rates rising over next 6-12 months however could drop further

But then again it's your decision in the end

 

[Rolf Latham]

Hiya NR

The banks win regardless...........its a 20/20 in most cases.

They have already secured the funds and then onsell plus their margin. If the loan goes full term, they wont lose, they have their margin. If the loan closes early, they have their full margin

ta
rolf

 

[Bradsdad]

I agree with some of the thoughts about fixing in for 5-10 years. An issue with this however is being locked into a particular lender for that period of time.
As we've seen in the recent past, lenders have been changing their policies. we are seeing more lenders dropping their max LVR's and should this continue one could lose the ability to to access equity. For example, lock in with lender "X" who currently has a maximum LVR of 95% for 5 years. In 2 years time you wish to access some equity from the secured property but lender "X" has now dropped their max LVR to 90%. You may then either lose the next opportunity to buy due to the new policy (unable to access equity) OR face possible penalties to refinance to another lender.

I guess even 2-3 years would be frustrating if the above occurred.

 

[Ms Jade]

^Good point. I wouldn't be happy if I wanted to access equity in year 3 or 4 and then realised my bank was the one that brought in a policy to increase rates to investors, for example.

 

[Gools]

It's easy to swap securities if you sell an IP/PPOR that has a fixed loan..........

Keith, could you explain this a bit more please?
Have only ever had variable loans so not sure what the consequences are of selling a property that is on a fixed rate.

Gools.

 

[keithj]

Keith, could you explain this a bit more please?
Have only ever had variable loans so not sure what the consequences are of selling a property that is on a fixed rate.

Hi Gools,

If I have 2 IPs A & B.... A has a fixed loan eg @6% for 5 yrs, and B a var rate loan. Assume both IPs are worth the same with the same loan amount.

If I sell A after 3 years, with 2 years remaining on the fixed loan term, then all I do is pay off the variable loan on B with the fixed loan. The nett result is substituting B as security for A's fixed loan. There is usually a valuation fee & miscellaneous paperwork fees (documented in the really fine print of course), but these are trivial.

Of course, B may even have increased in value by then, so you can then get an extra (either fixed or var) loan over B as well as the A's original fixed rate loan.

Cheers Keith

 

[grossreal]

hi Bradsdad
try the comm guys they have gone from 80% as a norm to 55% for some of them.
so if you looked in a 80% loan and there lvr has gone to 55% you have buckleys of getting equity out there.
so you have a very good point.
having said that you can still use cash flow and it the poroperty is neutral or positive you can use the cashflow.
so it a coin in the air job
and for me not sure how to pick it at this stage

 

[redwing]

I see your points. For me, though, it's not just about the rate. I've found I lose a lot of flexibility through fixing. Especially if rates rise and your looking at break costs to refinance etc.

Top er up

 

[Aaron Sice]

If I plan to hold my IPs forever - I'm happy with a 10 year fixed rate.

i'm not @ 6.99.

i'll take a 10 year at 5.5%

 

[Rixter]

I'm tempted by the 3 year deal. I've fixed for 5 in the past, but won't do that again.
What do others think?

Sounds a plan Rob.. This is my third consecutive lot of 3 year fixeds.