Interest rates hike

Deleted due to error in information within the question which may be interpreted incorrectly.

Comments

  • +6

    3years at 2% is a good offer for a risk adverse person imo

  • Splitting the loan seems like a possible option but depends if it cost you to split the loan.

    Another thing to look into is something like Bendigo Banks product where you can get a fixed rate but still have an offset.
    https://www.bendigobank.com.au/personal/home-loans/complete-...

  • +1

    Would the bank happily lock in a $1m mortgage at 2% for 3 years if they thought that rates were going to go up?

    • +1

      Absolutely. Their fees rates would factor in the variable rate rises. Beside, it is pegged to the fixed term bond yield

    • +2

      The bank is not taking any risk. They will hedge position.

  • Cash interest rates aren't going up.

    The only thing that keeps going up to the right is inflation and the price of assets at a rate of >5x 1Y.

    • +1

      So locking in a larger sum at 2% for 3 years would make sense right?

  • +1

    i would imagine that your offset portion should be some calculation between your initial offset amount and average expected net savings over the fixed rate period.

    Therefore this should be between than 400k, plus your expected savings over the fixed rate period / 2. Then adjust accordingly based on your risk appetite, your own views on the curve in which your expect the rate will rise, whether you'll need to draw off the offset amount, etc.

    • Thanks, your formula is the answer I've been looking for!

  • +1

    im curious why bank gave you that low for 3 years?

    • +1

      which bank**

  • We locked in $1.3m at 1.79% fixed for 2 years with CBA. Took maybe 5 minutes over the phone and was done in 2 business days.

  • Had a similar dilemma, and couldn't find a online calculator to help with decision. But I guess it is a bit of crystal ball..
    End of the day, we chose split loan with 20% in variable component; and remainder in 5 year fixed. (We thought 20% was about the amount we could comfortably save, in offset)..
    I'm still a bit disappointed that there's ongoing monthly account keeping fees - but learning for next time..

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