Is now the time to fix your interest rate?

O

ozmale42

I'm just looking at my loans . I have two loans are on variable rates (around $500k each at around 5.61%) and I've just purchased a new place which will be an IP for the first year then will become my PPOR (borrowings $800k with a $300k offset attached to that loan once it becomes PPOR).

I've never bothered with fixed rate loans in the past...but...they are looking quite attractive at the moment and can't be ignored. I'm seriosuly considering fixing some or all of my loans, or a variable/fixed split on each . My thinking is to split the new loan into fixed and variable for the new place so I can still use a 100% offset on the variable portion. I may also fix the other 2 loans for 5 years on the other two properties once they become IP's in a years time.

I'm just interested to see what others are doing with their loan structure given the low rate environment at present.

Regards
Pete
 
ozmale42 said:
I'm just looking at my loans . I have two loans are on variable rates (around $500k each at around 5.61%) and I've just purchased a new place which will be an IP for the first year then will become my PPOR (borrowings $800k with a $300k offset attached to that loan once it becomes PPOR).

I've never bothered with fixed rate loans in the past...but...they are looking quite attractive at the moment and can't be ignored. I'm seriosuly considering fixing some or all of my loans, or a variable/fixed split on each . My thinking is to split the new loan into fixed and variable for the new place so I can still use a 100% offset on the variable portion. I may also fix the other 2 loans for 5 years on the other two properties once they become IP's in a years time.

I'm just interested to see what others are doing with their loan structure given the low rate environment at present.

Regards
Pete
Click to expand...


Wouldn't fix today.

I would wait to see what RBA does, might find your variable .20% lower
 
I had a look at 3 yr and 10 yr australian bonds last night and the yields have been creeping up over the last week or so (correlated to the equities rally?). That implies the money market thinks IR's may have bottomed. This will also affect the price of money going forward and fixed rates may not get any cheaper if that trend continues. Of course this can all change almost instantly but if you were looking for a sign that now is the time to fix this may be it.
 
I personally think the 3 and 5 year fixed rates have bottomed. I dont think they will fall below 5%.

That said, winning' (as in fixing at a rate lower than the variable over the term) from fixing is dificult but not impossible, you are betting against the banks money market boffins.
The primary purpose of fixing is to insure against interest rate risk over the term. So someone who fixes and stays 'out of the money' during the term also 'won', because they mananged to hold onto the property during that time and werent affected by the short term spikes variable rates may have had.

Many investors choose to fix their investment loans, as they dont plan on paying the debt down in a hurry, and its another risk they can control. Also, and 'winning' or 'losing' is tempered by their tax rate. Even break costs for a fixed loan can be tax deductable if the purpose of breaking is for income producing purposes....
 
CBA Rate Drop

CBA Fixed Rate Drop!

1Year Fixed Rate 5.34% --> 5.19% (comparison rate 6.19%)

3Year Fixed Rate 5.29% --> 5.29% (comparison rate 6.09%)

Both of these are on wealth package.



Maybe its not the bottom of the fixed rates :eek:
 
Brady said:
CBA Fixed Rate Drop!

1Year Fixed Rate 5.34% --> 5.19% (comparison rate 6.19%)

3Year Fixed Rate 5.29% --> 5.29% (comparison rate 6.09%)

Both of these are on wealth package.



Maybe its not the bottom of the fixed rates :eek:
Click to expand...

NAB dropped theirs a week ago.

Personally I think we'll see a year of fairly stable rates and property prices (on the East Coast) which I think is a good thing. I reserve the right to change my mind at any time. :D
 
I fixed 2 of my loans at 5.39% for 3 years. Left the rest variable.

Am looking at taking 6 months off work so knowing my cashflow position was the tipping point to locking down.
 
Brady said:
CBA Fixed Rate Drop!

1Year Fixed Rate 5.34% --> 5.19% (comparison rate 6.19%)

3Year Fixed Rate 5.29% --> 5.29% (comparison rate 6.09%)

Both of these are on wealth package.



Maybe its not the bottom of the fixed rates :eek:
Click to expand...


If already with CBA is there usually a cost in converting from variable to fixed?
 
TingTong said:
If your loan is fixed, do you lose the ability to offset it?
Click to expand...

For this reason for majority of clients that are looking to fix I would suggest them to have a offset account equivalent to how much they think they would be able to save in an offset accout during the fix period.

Eg.

Client has $300,000 loan wanting to fix for 3 years, usually able to save $20,000 extra pa.
Would suggest an absolute minimum of $60,000 in variable still giving them the flexibility of the offset account.
 
Brady said:
For this reason for majority of clients that are looking to fix I would suggest them to have a offset account equivalent to how much they think they would be able to save in an offset accout during the fix period.

Eg.

Client has $300,000 loan wanting to fix for 3 years, usually able to save $20,000 extra pa.
Would suggest an absolute minimum of $60,000 in variable still giving them the flexibility of the offset account.
Click to expand...

Correct . That is why I will consider staggering my fixed loans and having a variable amount equal to my savings patters. That's assuming I head down the fixed rate road.
 
devank said:
ANZ's fixed rate > variable rate - 1% discount :mad:
Click to expand...

1.01% (6.4SVR to 5.39%) or .85% if your comparing SVR without the breakfree fixed rate discount, or .15% diferent is you are comparing breakfree SVR (.7) with breakfree fixed (.15).

1% isnt unusual a spacing between fixed and variable, though its usually a premium to fix, not the other way round. At the height of the last interest rate cycle the spread was about the same, fix for 8% or variable for 9.....
 
devank said:
5.49% (2 year fix) > 6.4%-1%

Does anyone get discount on the fixed rate?
Click to expand...

On the premium package Westpac offer 0.2 off fixed and 0.7 off variable...My current variable rate discount with them is 0.9 so I'm hoping they may go further than 0.2 on fixed

Cheers
 
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