Better to have a offset acc or fixed loan ?

Discussion in 'Loans & Mortgage Brokers' started by HBK, 8th Mar, 2022.

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  1. HBK

    HBK Well-Known Member

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    Ive had a offset for years but with talks of rate hikes im wondering if im better off fixing my loan ?
    Its a investment but its a offset loan , abit more then half the loan is offset but soon ill use all the money to buy more ips and there will be no money in the offset , the rate is 3.4% variable
     
  2. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    The question is would the variable rates on average be higher over the fixed period than the fixed rates over that time?

    For example, you can have a 2 year fixed rate of 3% or a variable rate of 2.5%. For the variable to be more expensive rates would need to increase to over 3.5% over the next 2 years in a linear manner.

    The truth is I think variable rates will rise, but I haven't got a clue by when, how much or how quickly. Nobody does. I've noticed even the banks economists rarely get their rate predictions right more than 3 months out.

    What I can tell you is that at 3.4% variable you're probably paying too much and there are a few lenders that have 100% offset accounts against fixed loans.
     
  3. Tony Xia

    Tony Xia Structured Loan Advisor Business Member

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    If you have no cash left at the end then it might be a consideration to fix majority of it if you want to hedge yourself and leave some variable so you can still use the offset.

    Very opened question cause we don't know your whole financial situation.
     
  4. Shazz@

    Shazz@ Well-Known Member

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    I’ve been fixing for 12 months at a time these last couple of years. I feel it’s been great in terms of flexibility, because if you do need to break, it’s not that painful. Between 1 or 2 years, not much difference in the fixed rate, but difference big enough when compared to variable.
     
  5. HBK

    HBK Well-Known Member

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    Why whats the typical rate ? Mines with cba
     
  6. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    Fixed rates are fairly harmogenous, but second tier lenders are almost all about 0.5% cheaper or more than the Big 4 banks (assuming 80% LVR).

    For example an investment variable P&I loan with a major bank is usually a bit over 3%. There's plenty of smaller lender (ING, Macquarie, Adelaide, Suncorp, etc, etc) that will do below 2.5%. The difference is similar for owner occupier rates and for interest only loans.
     

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