I was on a call with my home loan manager and he said that the 3-years fixed rate currently on offer is 5.59% and will change to 5.99% on Friday. I am currently on variable which will also increase to 5.83% on Friday as a result of the most recent rate rise.
At this stage, it is really unclear how many more rate rises will happen, if they do. Equally it is hard to predict if rates will come down again in the next 3 years.
Would you lock in for 3 years fixed at 5.59%?
Yes, I agree half and half is probably better.
I personally just split my loan into two 50% equal parts and fixed one of the parts for one year. I felt 2 or 3 years fixed had too high of a rate.
I personally think we’ve entered a time when OCR will stay in this 3-6 percent rage for a fair while. Though I still feel within 3 years OCR may be closer to 3 than 6.
I wanted to keep my offset ability on part of the loan that’s why I split my loan and only fixed part of it - the fixed portion has no offset ability. Not sure if your loan has similar restrictions.
I did ask about 1 and 2 years fixed rates and they are both over 6%. I also have offset ability, so perhaps splitting part fixed and part variable may be the way to go.
Can you weather the storm, and sail into the unknown. For if you pass this turbelence it will be smooth sailing ahead.
2 more rate rises 25 bp each by November is my guess
I would say no to fixing, my crystal ball looks shitty in 12 months' time
You might want to check your rates though, I am on 5.44% which will change to 5.69%.
My crystal ball ran out of batteries, and doesn’t take eneloops.
if your crystal ball is out of batteries, try crystal meth
I think were at the final stretch with the rate rise, I assume 2 to 4 rate rise and RBA will be chill for a while……
How much over 6% they quoted you as you're going to be on 5.83% soon. If it isn't that much over 6%, I would calculate your repayments on that for a year but also I wouldn't even do 1 year if its over 6.2%.
Other have suggested, split loan could be an option too.
I hate being an adult
The second you fix the rate inflation will come crashing down :P
I know this will happen. The RBA is literally waiting for me to fix my rate.
hurry up and fix so the rest of us can benefit
Could be, cos they’re certainly not basing their decisions on prudent economic management.
Not a chance I would be locked into the same bank for 3 years for such a tiny discount over the variable rate.
Tell them to stick it.
especially when you can refinance every year and potentially get a 3-4k cashback (if some banks still offer it next year) how much would 4k take off the effective interest rate?
If you couldn't bear any further rate hikes then locking in could be a good option.
The only good thing about fixing is that you have certainty of repayment.
On the plus side, your repayments won't change so assuming no change in your circumstances, you know you'll be able to make your repayments for the next three years.
On the downside, if the variable rate decreases over that time, you need to be prepared to wait it out or cop what could be a significant break fee. Also on the downside, if rates don't decrease over that time but instead continue to rise, when your fixed rate expires you could be in for a nasty shock (just like those people coming off the ultra low rates now) unless you keep a close eye on movements.
Personally I think we will see the cash rate rise to 4.85% then remain steady for a while as the full effect trickles through. Rates may start to decrease late next year but I wouldn't be counting on it.
In a nutshell - if another increase is going to wipe you out financially then I'd look at fixing. But if you have the wherewithall to ride out the storm, I'd leave it variable. Maybe shop around different banks, see if you can refinance elsewhere at a cheaper rate. I know that both Westpac and Resimac are dropping their assessment buffers for refinancers with a good repayment history, it might be worth a look.
My Crystal Ball is from Aliexpress and it stopped working. Had to vote by my gut feeling, so might be wrong
Your loan manager, who does this all day every day for a living, wants to make a bet that fixing it at that rate will profit him and you want to bet against him?
it literally wont effect the loan manager or their business, they themselves are borrowing money at a fixed rate for a similar timeframe, either way they earn money on the spread.
here is food for though
variable always beat fix rate long term if you can handle the rate increase whatever it maybe
Not if you did 5 years fixed at 2%-3% last years just before it want up.
I did this and now loving it, savings and shares make more than the home loan even after tax
In rare exceptional circumstances you can fixed rate at extremely low rate for more than 5 years you may come out on top
but over the life of your loan, you ALWAYS wins with variable.
Variable and keep refinancing
If you can handle a few more increases I would keep it variable. Unlikely that this rate will last the 2-3 year fixed contract.
When you switch banks you will get a discounted rate and possibly a cashback.
more info needed
1.) how much is your loan
2.) how much extra can you pay per year etc
3.) do you need an offset?
4.) do you intend to sell? if so breaking fixed may incur fees if the current lending rate goes down.
all things said why not do half and half
and in reality your looking at minimal swing in the next 3 years
my opinion rates will go another 2-3 times, stay that way for 2 years or so.