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Advice needed on fixing interest rate

Discussion in 'Property Finance' started by Kokee, 17th Oct, 2015.

  1. Kokee

    Kokee New Member

    Joined:
    1st Jul, 2015
    Posts:
    2
    Location:
    Sydney
    Currently i am paying variable IR of 4.8%. I can fix IR for:

    1 year 4.27%
    2 yeas 4.24%
    3 years 4.37%
    4 years 4.61%
    5 years 4.77%

    Property details:
    IP
    loan amount = 500k
    offset account = 50K

    Q1: for how many years i should fix IR ?
    Q2: what portion of loan amount should be on fixed and variable rate ? 50% - 50% ? There is no offset redraw facility available if whole loan amount is fixed (for the duration of fixed period). But if i keep some potion on variable, my offset account will stay and remain accessible.

    Thanks in advance :)
    Kokee
     
  2. Vinnie_Chase

    Vinnie_Chase Member

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    Location:
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    I'm also interested in what are the limitations and restrictions that there are by fixing rates?
    • Additional costs of refinance
    • Can't access equity
     
  3. Travelbug

    Travelbug Well-Known Member

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    Location:
    Sydney
    @Kokee Can I ask where you got those rates? Is the $500k one loan or the total? I am looking at my loans at the moment as they are just coming off fixed. I want to fix some and leave a couple variable with offsets attached to park some cash.
     
    Last edited: 18th Oct, 2015
  4. Jamie_

    Jamie_ Well-Known Member

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    Location:
    Perth
    I'd wait until the next rate cut, then do it.
     
  5. Waterboy

    Waterboy Well-Known Member

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    I'm not a big fan of fixed rates under the current economic circumstances.
     
  6. Travelbug

    Travelbug Well-Known Member

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    What economic circumstances are you waiting for? I want to fix some as I'm retiring and don't want everything variable. It just gives me piece of mind.
     
  7. Scott No Mates

    Scott No Mates Well-Known Member

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    Location:
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    From lowest to highest you're looking at savings of $2,500 pa.

    Is $50/wk going to change your life?

    First world problem.
     
  8. tobe

    tobe Well-Known Member

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    Location:
    Melbourne
    If the rates were all the same, how long would you fix for? Regarding how much to fix, how much extra can you pay or do you think you can pay per year? Times that by the number of years fixed, mix
    Bus the total loan amount gives you the amount to fix.
     
  9. Redom

    Redom Mortgage Broker Business Member

    Joined:
    18th Jun, 2015
    Posts:
    853
    Location:
    Sydney (West) and Canberra
    Aside from the pricing decision thats impacting your decision, some other considerations to think about (repost from elsewhere), first step is to work out whether it fits in with your plan:

    1. Do you plan on releasing equity in the short term, are you sub 80% and is your serviceability strong? If you are, then you may have considerable flexibility in valuer shopping and using your flexibility to release equity as required.

    2. What are the chances of selling during the fixed period? This is the other main reason why people incur a break fee.

    If answers to both these questions are suitable for a fixed rate strategy (q1, no equity release planned, slim chance of selling), than its worth looking deeper into fixing for a period of time.

    You may want to look at the market as a whole to work out what fixed rate you should be paying, contrary to common belief, some fixed rates are negotiable.

    Cheers,
    Redom
     
  10. Waterboy

    Waterboy Well-Known Member

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    I'm faaaaar away from retiring and the thought of rate cuts (the market is pricing this in, it's not just a guesstimate) and inflexibility of fixed rates just don't give me any peace of mind.
     
  11. Waterboy

    Waterboy Well-Known Member

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    The swap markets are showing all-time lows in interest swap rates -- I won't be surprised if fixed rates offered in retail banking prices go down further. At the moment the banks are keeping their fixed margins high, but if there's a major player that cuts fixed rates the others will follow.

    (It's not true that banks try to "beat" us by offering fixed rates -- their margins are fixed and will not increase when RBA rate is cut, unless thay have unorthodox risk management.)
     
  12. Dazedmw

    Dazedmw Well-Known Member

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    Location:
    Melbourne
    ME Bank cut its 2 year fixed rate a couple of days ago.
     
  13. Marty McDonald

    Marty McDonald Mortgage broker Business Member

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    Location:
    Sydney North Shore and Norther beaches
    With all the changes to lending criteria lately and the slow down in lending that it will likely cause my tip is fixed rates will become an area for the lenders to compete on. That and the money market predicting a few more cuts to rates..

    I'd be surprised if we dont see some more sub 4% fixed rates.
     
  14. Waterboy

    Waterboy Well-Known Member

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    Last year my "expert broker" was trying to convince me to fix my rates because "it will never get lower". Thank god I didn't listen to him. I knew he was clueless about rates because the markets were saying a different thing. It's great to have public access to market information like this (which in late 2014, after the poor GDP results were out, correctly predicted 2 rate cuts in 2015): http://www.asx.com.au/data/trt/ib_expectation_curve_graph.pdf