Fixed Rate Home Loans with Offset Account

Lsupacheap on 23/11/2020 - 12:22

Hi Team,

I just discovered that both Macquarie and ANZ offer fixed rate home loans with offset - ANZ I believe limits this to their 1 year fixed rate only. Apart from the risk of the variable rate dropping below the fixed rate over the term of 1 year - what other issues or risks do you guys forsee? I'm not entirely sure why banks would offer an offset with a fixed loan but I'm wondering if I am missing something blatantly obvious.

Sidenote: I am with ANZ and after seeing this quite keen to switch from my 100% variable @2.69% to their 1 Year fixed @2.09%. So keen to hear why people may or may not take this up.

Financial Home Loan

Comments

  • holdenmg on 23/11/2020 - 12:53
    +1

    https://rba.gov.au/statistics/interest-rates/
    If "the trend is your friend" I'd stick with Variable.

    • leiiv on 23/11/2020 - 16:11
      +1

      But what is the lowest rate that is still in the realm of possibility?
      We can assume that a (retail) loan with 0% interest is impossible. So what is the next possible number? 1%?

    • brendanq on 23/11/2020 - 18:51

      Agreed. This is what all my friends who are smarter with money than I tell me

    • supacheap on 23/11/2020 - 22:51

      If rates are "highly unlikely" to go negative then what else could be a trigger point for mortgage rates to go lower? I say highly unlikely but then again who knows.

  • redfox1200 on 23/11/2020 - 13:00
    +2

    it's unlikely that the variable rate is going to drop 0.6% in the next 12 months, and for you to loose out on the fixed rate it would need to drop even more than 0.6%.

    • netjock on 23/11/2020 - 13:56

      That is what I thought in Feb 20 when I thought that when fixing for 1 year. Lucky only a fool for like 11 months.

      These crazy fixed rates are only because RBA is giving away free money. It probably won't last. Then people will be in a hole.

    • supacheap on 23/11/2020 - 14:17

      I suppose the point of comparison if you fix at 2.09 is if the 1Y fixed rate drops any further - which is likely given competition between lenders. But the downside is continuing to pay the 2.69 until you decide to fix.

      If you put aside any issues re rates moving lower are there any issues with fixed rate offset vs variable rate offset? I guess I was more wondering if from a product standpoint are there any features I am missing apart from the fixed/variable rate bit.

  • srsparky on 23/11/2020 - 13:24
    +4

    CBA offer an offset account (well did when I had a fixed rate) for fixed rate loans, however it wasn't a 100% offset - IIRC it was only a discounted 0.15 off the fixed rate for the amount in the offset.

    I would love a IO, invester, fixed rate with 100% offset, but I think that might be a unicorn….

    • holdenmg on 24/11/2020 - 11:13
      +1

      If I had a Unicorn, I wouldn't need a loan.

  • phcyso on 23/11/2020 - 13:42
    +2

    Bank Australia is doing a 2 or 3 year fixed at 1.99% starting on the 25th

    https://www.bankaust.com.au/about-us/news/corporate/articles…

    They have a 100% offset for all their home loans

    • supacheap on 23/11/2020 - 14:11

      That seems really good! Unfortunately I'm keen to stick with the Big 4 for now for convenience but really interesting that there are a lot of fixed rate offset products out there - just didn't think they existed as a concept

  • GenotypeJim on 23/11/2020 - 20:19
    +1

    I just got 1.89% fixed for 4 years with Bank of Melbourne and kept a few grand variable with an offset account. Oh and $4K cash back on the loan, $50 cash back on the offset and $300 cash back on the new credit card.

  • MadgeH on 23/11/2020 - 22:46
    +1

    Macquarie doesn't do offset on their fixed loans. Out of the big banks, ANZ 1yr is the only one with 100% offset on fixed.

    Bankwest does 40% offset and a couple of other smaller lenders

    • supacheap on 23/11/2020 - 22:50

      That's really useful thank you. I wondered how/why a lot of them were offering an offset feature but clearly not necessarily the case.

  • tunzafun001 on 23/02/2021 - 22:53
    +1

    Out of curiosity, why do people stick with big 4 banks?

    I dipped my toes into CBA waters in 2018 (after moving between credit unions for 15 years). I'm going back to a credit union. No BS package, or on going fees. None of this press.2, press 5, 2 ,4 every time you call. Im used to Just ringing a number and speaking to someone.. lastly I was offered a 2.75 variable (offset) / or 2.19 fixed rate (no offset). Credit unions are offering 1.95 variables (>$750k) or 2.2 fixed and BOTH loan products are 100% offset.

    The only reason I can see is for the Refi Cashback? Package fees are useless..over inflated insurance products and credit cards can be picked up with no annual fee and points anyway. In fact, you are worse off locking onto one card full time (miss out on new card sign up bonuses).

    • MadgeH on 24/02/2021 - 08:19

      Who is offering 1.95% variable? Not a 1 or 2 year special I assume?

      • tunzafun001 on 24/02/2021 - 14:35

        Easystreet. Not sure if it's a honeymoon rate.

    • pndl on 24/02/2021 - 11:26
      +1

      Big 4 banks have its place. There is a reason CBA has the biggest portfolio - partly because they have the most branches and existing customers - but also because they will do deals other banks won't.

      Valuation - big 4 banks use automated valuations, credit unions full valuation or desktop at least
      Credit Exposure - credit unions won't lend more than $1.5-2m to a person
      Professional Benefits - LMI Waivers for particular professions like accountants, lawyers, doctors, miners
      Complex Borrowing Structures - Can lend to trusts, companies, lending with guarantors. E.g. CBA has a co-investment product nobody else
      Cash Out Policies - More generous with equity cash out and reasons

      • tunzafun001 on 26/02/2021 - 11:50

        Cheers for this info, good insight.

        So really the 'average jo' mortgage' is better off with a credit union (better rates and no one wants to go into a branch these days anyway). Complex structures for the Big 4.

        In terms of 'deals' what rate do you think CBA should be offering me with 4 mortgages at around 60% LVR. They offered 2.77 offset variable, 2.1 Fixed (no offset)?

        I was thinking rates closer to starting with a 1 (since there is no offset on their fixed products) and they charge you $30 for their "package".

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