First of all, I am aware that there is a 99.9% chance that this is a very stupid question.
But I'm going to ask it anyway..
With lots of talk of raising interest rates soon and so many people will be defaulting on their homes because of it, why aren't they already in a fixed loan? What are these nervous easily broken people holding out for? More good times? Should I have waited? What am I potentially missing out on here that I should of risked it all waiting for?
I tried to refinance around that time as my fixed period was ending and they wanted significantly higher rates for fixed. The longer the term, the higher the rates. I remember it being well over 3% for a 3 year fixed.
My variable is 2.24% and I don't have to pay a package fee each year to have a fixed loan.
The only time I have fixed it in was when interest rates were 0.25. I didnt think they would drop one more time, but even if they did, i wouldnt be much off the lowest point.
My fixed rate at that time was 2.29%
We got 1.89 fixed for 4 years last year on Westpac. The package fee is far outdone by the interest.
Can’t tell if serious…
I fixed December last year. 2.7% for 4 years with an offset account. Seemed like a good idea.
that's a great decision.
How did you get that fantastic rate???
Shopped around! Wasn't really interested in fixing initially until I found a lender that would offer 100% offset with fixed: it then seemed like a no brainer
May be a stupid question, but I fixed at 2 04 until 2024. When I use some of those online "break fee" calculators it estimates zero cost to break the fixed term as the same loan now offers a higher Intrest rate? Is this correct ?
Yes. Because there is no loss to the bank, there are no break costs for most banks. Check your agreement for details, or just call your bank.
I fixed it at 1.9% or thereabout for 3 years until mid 2024.
Banks have since closed the door though, they're now 3.8fixed or something. Just let it ride if you're still variable, not much you can do anyway.
I split my loan 70/30 got 2.00 fixed for 5 years on the largest portion and 2.65 on my variable. Paying a (profanity) ton less now than when I signed my initial homeloan docs and even that was less than what I was paying in rent per month..
I have a stupid question for you for fellow ozbargainers.
The only reason I don't consider fixed rate is that, all the discounted rates variable home loan terms and conditions that I looked at, stipulated that upon switching over to fixed rate and its completion; when you return to variable rates, you are no longer eligible for the discounted rates. So they put you on the default base rate percentage which is usually 1 to 2 percent higher than their discounted rates.
Is this what really occurs when you finish your fixed term?
Correct, but generally you will then negotiate a variable rate with the bank that is lower than the standard variable rate but still higher than the new customer rate. If you aren’t happy with the negotiated rate then the smart thing to do is refinance
Wow. So this is what I'm really worried about. Because after the term, one may not even be able to refinance, due to changed financial circumstances, or tighter lending criteria due to high interest rates in the future.
So if you can't refinance, you are stuck on non-discounted standard rate.
Exactly.
If you forsee big changes in your financial future, factor that in. Otherwise, just refinance and get the better rates and cashback bonus.
i locked in 3/4 of mine and kept the other qtr in variable with offset
Lucky I refinanced just before the fixed-rate increased. Fixed 3-year at 1.98% until March 2025.
I can make total extra payments of $20k in the fixed period, which is fine for me. I use the Westpac 2% p.a. savings account as the "offset account", after-tax is around 1.35% for $30k. I guess this is a better option for me.
Link?
Ah too old it would seem
Fixing is probably best for those who could lock in a good rate or need stability with respect to repayments.
Otherwise, if you were to fix today then the banks have already accounted for some rate rises and you are also restricted to the same lender over thay period.
One of the things people don’t necessarily consider is the shock to the personal budget when the fix rate ends. You could go from 2% to 5% overnight when that happens.
I am paying 3.32% P.A on a Loan to pay out my Ex..
If I Lock in the Interest it only drops to 3.14%P.A but I then can only pay an Extra $10k Per year extra payments.
I plan on paying it out much sooner than 30 Years so I can Move on.
So Not an option for me..
I've had mortgages for over 40 years and have periodically checked this
if you look at historical graphs, the opportunity to do better than variable loans with fixed loans tend to be short periods of time in narrow windows
and most folks who fix, find that variable rates drop or remain lower for longer and they end up paying more than they would have had they stayed with fixed loans
plus all the other restrictions others have mentioned …
This is the correct answer, historically, variable loans are cheaper over the life of the loan compared to fixed.
I fixed mine for 5 years at a little over 2%.
I figured the interest rate wasn't going much lower for variable but had the potential to increase.
If after 5 years the rates suck, I'll throw more money in the 100% offset.
yep, quite a bit of my loan is Offsetted (is that a word lol) cant go fixed, wouldnt save much in doing so anyway even if they do go up.
Maybe they aren't fixing because it is just delaying the inevitable house prices to plunge 74%
If you think it costs $2k a square metre minimum to build a house, a $1m house will be worth $260k if the article is correct.
😆
Economists and finance academics have been saying for 13Y that Bitcoin is a Ponzi and will crash to zero.
These pencil necks have been wrong 447 times. They can't predict their way out of a paper bag even if their life depended on it.
Property and Bitcoin are two different things. For starters you can't live in Bitcoin. You probably can't live comfortably without a home (even if you rent one) but you can still live comfortably without Bitcoin.
If nonsense prevails, soon we will see a sad world with real homeless individuals living in NFT mansions, driving NFT cars moved by some NFT non-pollutant. They will be meeting NFT partners, enjoy NFT food, drinks, and trips around the NFT world.
Then the government will change the criteria for homelessness. Only the one who doesn't have an NFT house will be considered homeless.
Taxes, however, still must be paid using real Australian dollars.
I think you are also forgetting the government would never allow this to occur, and will do everything in their power to prevent it.
Of course not. The foreign investors would all swoop in and own the country.
The domestic investors who depend on rental income will get a pittance and move onto government pension. The government is loving it when property price goes up a lot of people with investment property won't meet the means test for the pension.
Let's not forget for those who don't sell will be in so much negative equity. For those that sell will have such a large debt.
Downvote all you want, this isn’t an optimistic fools perspective saying this won’t happen — it’s reality.
If there were to be a large scale default scenario, the government would step in and/or pressure banks to prevent this.
I’m not in favour of it, just knowing that the Australian economy is dependent on real estate and the hamster wheel it has become.
You have my up vote; I think you are right. Australia's economy has been kept alive by real estate, which I think is inappropriate and unsustainable, if you ask me.
However, "everything in their power" might not be enough depending on the situation. I'd say the government has used lots of its resources in the last two years to create an artificial positive economic scenario.
It will be interesting to see what will happen here:
https://www.aihw.gov.au/reports/australias-welfare/home-owne…
*The data on "Proportion of households by housing tenure type, 1994–95 to 2017–18" stopped in 2017/18.
About $1,650 for something very basic these days. Two storey sure getting close to 2k
So you build a house and if you had to sell you would make a massive loss.
Would land also go down 74%?
I think we need to calm the farm. Analysts have no idea, history of getting it wrong.
There will be people praying for it. But then why would companies be paying us current wages when cost of housing just went through the floor.
Maybe back to 1990 wages.
I like variable because I can make extra payments as I see fit, which is generally not available with a fixed loan.
Investment still fixed until the end of the year for 2.29%
St George allow you to pay up to 30k extra a year on a fixed. Can also redraw.
Also have a offset which is almost completely offset at 2.59% and fixed portion of my PPOR at 2.39%.
Got the intro rate at 1.99% but that expired.
Some banks allow you to break a fixed loan with 2 months left. Is St George one of them? Anyone had any experience with st George moving to another lender?
The bank sets the fixed rate after consulting their financial experts, and they will price in a fixed rate such that the bank doesn't lose money by offering it. So do you think you are smarter than the bank? I think it's a no brainer for most not to lock in interest rates.
The only reason to do so is for investments where you need a highly predictable income / expense ratio.
I will have mine paid off in 3-4 years.
Fixing likely wont be worth the costs early on as the remaining balance will shrink as the projected rises roll in.
westpac allows you to spilt your fixed rated in to as many segments as you want and since is considered a different loan you can pay each one 30k in advance.
I won't fix as it allows me to pay extra repayments beyond the cap of a fixed rate, have the funds sitting there as 'redraw' and more than half the life of the loan.
Approximately 80% of consumers lose by fixing and 20% win.
The banks are smart enough that they don't allow the majority to make money at their expense.
Because fortune favours the brave
I have fixed (mostly split loan with portion of it fixed) several times. From memory only 1 or 2 times I end up better off. Other than the rate difference, there is also a hidden benefit of being on variable. Just like the credit card points churning, these days banks often offer $2000-$4000 rebates when you refinance to them. There is a cost of exiting your current bank ($600 gov fee at very minimum but fix has exit fee). Do the math and you could get some "free" money each year with only paper work and patience.
Banks don't need RBA rates to rise to increase their own rates. It sucks, people complain, but ultimately it's what they can / do, so deciding whether to fix or stay variable based on how many rate rises you think there will be in that period may not be the best bet. Get proper financial advice (not judging ANY comments in this thread, everyones' different)
You can't take money out and it's at best a safety bubble for 3 years. Then you're back to variable.
My mum didn’t because she wanted to pay heaps over the repayment amounts and with fixed she wasn’t able to pay off as much as she wanted to. It’s a split loan so 1/3 she can pay off quicker then 2/3 fixed.
The main reason people aren’t fixing rates is probably up front fees to do so. Fixed rates are lower and will remain lower… everyone on a fixed rate is going to save. There will be no exceptions to this on the next few years. Rates are going up, not down.
Not sure if anyone is still reading this thread. Looking to lock in a fixed rate for 3 years and was hoping someone could recommend a comparison service. Looking for 3yr fixed, $450k, living in dwelling.
This isn't correct. If you fixed middle of last year, you have 4 years of winning rates.
You just have to do your own calculations for your situation. Whether you have a large offset etc.