Need Advice: Paying $750 for Rate Lock on 3yr Fixed Home Loan

dsp26 on 11/12/2017 - 23:23

Hi all, just wanting some advice.

Contracts have been exchanged and valuation all approved so lender (CBA) paperwork is being finalised.

However, my lender told me today that CBA will be raising the interest rate next week so I should lock in my rates now as the rate I end up with is what it is set at on settlement.

Now according to this, CBA shouldnt be raising their rates as that was only last week:
https://www.commbank.com.au/news/rba-updates.html

Is this just an additional revenue trick? Because even if my rate goes up by say 0.2%, over the 3yr fixed period i'm only losing out on just under $500 if it were to rise for my loan amount.

Thanks in advance

Financial

Comments

  • MadgeH on 11/12/2017 - 23:33
    +1

    Hi there,

    Fixed rates are tricky as they can move at any time, regardless of what the RBA does and you'll receive the rate available at settlement unless you're rate locked.

    I assume you fixed at 3.99%?
    Your lender/banker gains no benefit in your rate lock so he may very well be giving you good information, you just need to consider if it's worth while for your circumstance.

    Most lenders charge 0.15% of your loan amount as a one off fee to rate lock, CBA charges $750 flat.

    I hope this helps

    • [Deactivated] on 12/12/2017 - 03:44
      +3

      Username checks out

  • garetz on 12/12/2017 - 00:44

    If a bank recommends you to fix i usually do the opposite as they usually tell you want they want you to do that benefits them not you.

    you need to specify the rate you would get fixed vs variable, but your loan is so small 0.2% makes little difference, its the potential rate rises in the future that should have you worried.

  • poboy on 12/12/2017 - 07:22

    Banks like fixed loans because they lock you in to being a customer. I like variable loans as I can move to another lender at any time if there's a better deal.

  • Seraphin7 on 12/12/2017 - 09:42

    You've answered your own question haven't you? Pay $750 to get a lower rate, or pay an extra $500 via a higher rate.

  • Peck on 12/12/2017 - 10:11

    Which way would you sleep better?

  • HighAndDry on 12/12/2017 - 11:17

    Because even if my rate goes up by say 0.2%, over the 3yr fixed period i'm only losing out on just under $500 if it were to rise for my loan amount.

    Wait, are you certain? If you're borrowing say, $500,000.00 -> 0.2% per annum would be $1,000.00 per year = $3,000.00 (thereabouts not including compounding) for the 3 year period. For you to only be down $500.00 from a 0.2% increase, you'd have to be borrowing less than $100,000.00.

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