5 year fixed rate from St George

Just locked in a 5 year fixed rate from St George this week for 4.54%

Investor
80% LVR (though I think their appraisal was BS and its around 75%)
P+I
$620k

Personally I don't think it was a great rate as was an internal refinance (moving a property off the St George portfolio loan) and I think interest rates are going to go up far slower than banks are saying they will this year (and I expect 3 year might even drop over the next few months....however with todays USA CPI numbers who knows....)

But I thought worth posting the loan specifics so people can accurately track whats being offered and I sleep well at night knowing that this is another IP that is locked up until 2023.

 

It's not a bad rate IMO. I can fix at 4.49% for 5 years. It kind of seems low risk. It wasn't that many years ago that half my loans were at over 9%. 4.49% is less than half that.

 

How much is their Basic Home Loan rate these days? Is the 5-y premium above the Basic HL worth the “expected” rate rises?

 

Westpac Group offering 3.59% for basic product at the moment

I personally like the 3 year fixed rates at the moment, 5 year is a little high for my liking but gives you great predictability if that is your objective!

 

5 years generally always aren't the most cost effective in terms of pricing just by the nature of where funding comes through - with it being preferred to be batched out in 2-3 year terms. The flexi rate is nice and sharp - but it's always worth noting the reverting rate and understanding what the plan is after that date. Refinancing isn't always an option and the last thing you want to do is be stuck on a high reverting rate once it comes off.

AMP had a great rate at 3.59% ongoing on their pro-pack for any loans over 250k, however this has been put at a min 750k lending from now.

 

My problem with 3 year is that I don't think Australian mortgages are going to go up in most of 2018 (maybe once just before the end of the year) so with a 3 year mortgage you are paying a premium....only for 2 years of protection.

At least with the 5 year you are getting "4 years of effective protection".

This said, I'm concerned with where rates are going to be in 2013.....probably on their way back down - though I think they may get a lot higher this next cycle than people are ready for in trying to mop up all the excess QE cash generated during 2008 to 2005.

 

We don't have one.

Well apart from knowing "12-18 months out that one of the loans will be going variable and calculating in advance how bad that's going to hurt".

At the moment our loans are going variable around 12-18 months apart from each other though going to tighten that up as have to sell all 4 properties in 2026-2027 before we move back to Australia due to Heart Taxation Act.

We can afford for rates to go up.....just prefer to have rates locked in for 5 years so know I don't need to worry about it regardless of what happens.

 

Longer term fixed are probably more appropriate for expats/overseas lenders where flexibility benefits are usually more limited (its harder to move, less lending options & more pain factor once finance is obtained). I would imagine refinancing activity in this segment is materially lower than other consumer segments. There's likely to be less noise & marketing impacts playing a part too (local borrowers are shoved rates/numbers down their throat on radio, billboards, everywhere).

For those locally, the downside to fixing for a 5 year period are likely to be felt more (ignoring price as a decision factor).

Overall, it can be a decent debt structure for a medium term property play - noting that the cost of funding is quite low for a relatively extended period of time.