5 year fixed, Lock it in?

Hi all,

Hoping I can obtain some wisdom.

Potential first home buyer, looking at making a purchase on a POR property for our family to live in. I know, just a few years late....However found a home we like and it suits our lifestyle - likely being the home we stay in for years to come or when interest rates exceed 8%

I must dress to impress as many viewings I have attended the agent has asked me if I will be paying cash, unfortunately not.

As we are financing in these troubling and uncertain times with rates being the big question. Would one be wise to lock in 5 years fixed? I notice Ubank offer a good rate at 3.19% for 5 years fixed with a 15% deposit.
(Don't remind me of what they have been)

For me at this current time, seems a little excessively high, but would It pay off if rates go higher?

I have seen a broker however doing my own digging found this deal with ubank to be better.

Also have allowed for an increase to 5%+ in the years ahead (gulp) and can easily service it however if I can be cheeky now and delay it for 5 years this could potentially save me some coin.

I know there would be arguments for it and against it but being ultra conservative would this be a sensible decision?


Cheers all

 

The benefit of fixed rates is known repayments, and protection against rates going up a lot.

but…. What about things like offset?

 

How can you debt recycle with a fixed loan without breaking it. 5 years is a very long time.
What about offset accounts

 

5 years is a very long time, but it may work out for you since bond prices are increasing and also rates rising in the future.

Why not split the loan part fixed part variable ?

 

Hi Terry, hope this message finds you well I’m currently in a similar boat, exploring/considering various loan options. I’d be keen to get connected with you and get your advice & help structuring my loan etc if possible. Unfortunately, the forum doesn’t allow me to PM you as I’m still a relative new member. Would you please PM me when you get a chance? Thanks so much in advance!

 

I don't participate in the PM thing here. you will have to email my company to get in contact.

 

Thanks very much everyone for your insight.

A split loan was something I hadn't even considered being too caught up with everything else.

Have decided to go 3 years fixed at 3.14% with a split percentage (yet to be decided) being variable with an offset.

Again, big thanks to all!

 

My personal opinions - current inflationary pressures are due to covid induced supply shortages but most economists are treating them as if they are a result of increased demand.

The reality is that we don’t have increased demand (I think retail was down 10% last month which is extremely worrying), it’s all supply shortages driving prices up. In few months, supply shortages will get resolved and we will be back at square one with lacklustre spending and economy recovery challenges.

RBA knows this and hence they are in no hurry to move interest rates. Banks know this but they are using ‘supply induced inflation’ to drive the fear of rising interest rates hoping to lock as many people in as possible to higher interest rates before supply shortages ease and people realise there was no real inflation to begin with.

With fundamental economic woes still there, an election coming later in the year and covid recovery still ahead of us, I think it will be 2-3 years before RBA can even realistically look at increasing rates.

My personal opinion - DYOR!

 

My approach on my PPOR loan is to have a fixed portion and a variable portion. I look at the rates on offer, and take the sweet spot which is usually 2 or 3 years (I have been going with 2). I set the variable portion to be around the amount I should be able to offset within that fixed period.

My fixed period will be ending in a couple of months, so I will no doubt go through the decision again - fix a smaller portion and keep offsetting the variable.

Cheers,
Inertia

 

Great topic, and sorry to hijack.
I am in the midst of looking to fix IO for the IP and the rate for 2, 3 and 5 yr is a big spread (0.5%).
Is 3.99% a good rate for 5yr int only Investment? I have missed the boat to fixed it last yr.