Does anyone fix rates for more than 3 years?

Hi there,

Just wondering if anyone is brave/stupid enough to fix rates for more than 3 years? A few banks are offering fixed 5 years IO for 4.99% and I'm just trying to do the maths based on rates not going up until 2019:

2018 - make a loss as 4.99% will likely be higher then market rate
2019 - make a loss as 4.99% will likely be higher then market rate
2020-2022 - surely there's a chance that rates would start to get into the 6s or 7s and therefore 4.99% would be then looking pretty good and you'd end up on top?

Is another consideration that people don't like fixing for ages as it limits your ability to move banks/get equity out/use an offset?

Thanks! Mason

 

@Mason
Just depends on your life plans. Do you intend to hold on to these properties long term? what could change between now and then that will result in you deciding to sell these properties?

Being able to move banks / extract equity is a valid enough reason to not fix for that long (depending on where the market is going) - goes back to how your borrowing capacity is, and whether there is still potential to expand your portfolio.

 

Nope

 

Yep - 5 years always.

I don't like variable. Love being able to plan years out from now and know exactly how much income/outgoings there will be across various IP's

And you can get better investor rates for 5 years fixed - 4.49% is offered to Australian investors for P+I by a number of banks.

(lol and not the same....but yes my USA PPOR is 30 years fixed.......love knowing that even though it cost me about 0.5% over a 10/1 year jumbo fixed that my mortgage for the next 27 years will be 3.5% - seemed like a bargain to me and with the fed raising rates and the current 30 year fixed jumbo at 3.95%....even more so these days)

 

3 years is usually the max I would recommend. It can be difficult to accurately plan beyond a few years and you don’t want to find yourself having to break a fixed loan (costs can be high).

Cheers

Jamie

 

If your done accumulating (or have hit servicing wall hard) and have no intentions to sell in the next 5 years I would fix for the 5 years, but only for piece of mind, and knowing what my expenses are for the next 5 years. I wouldn’t do it if I had any plans to keep buying or withdraw equity though.

 

Yes, fixed my IP for 5 years, IO.

I have no intention of selling this property anytime in the near future and the 4.51% IO rate was pretty attractive.

 

Thanks for your thoughts...

Yeh I'm done accumulating (because I've hit the servicing wall hard and don't think this is going to change much in the next 5 years) and plan on keeping these properties long-term.

In regards to equity I think the unit market is going to be pretty flat for the next few years so might be hard to get much equity and I can survive by waiting for five years to get this anyway.

Overall I'm not thinking about fixing long-term for piece of mind, but more to save money, that's the principal driver. I don't have a crystal ball re what the rates will end up doing though!

 

4.51% IO is pretty good, who was that with? Was it fixed a while ago when the rates were better?

 

It's with CUA. This was their 5 years IO fixed rate at the time. It has gone up now.

I got in just in time before the APRA changes kicked in early this year and CUA actually stopped taking all investor clients. I believe they're now accepting them again.

 

3.99% IO fixed for 4y in late 2016 with nab

 

If you split the loan you can fix part only and thereby still access your equity growth via the variable part.

 

I had fixed at 4.89% for 5 years back in 2014. Probably cost me $1500 a year, but to be honest I was quite satisfied paying anything under 5 at the time.

Property has gone up in value by some $170,000 so it's much of a muchness.

 

In the process of fixing 2/3 of PPOR loan for 3 years IO at 4.34% with CBA

 

I fixed a RAMS loan back in 2016 for 2 years 4.19%
Just wanted stability at the time. My other loans with other major banks was about 4.21/4.34% so I wasn't particularly pleased with myself.

I'm thanking Bobby from 2016 for that decision.

 

Yes I am about to fix for 5 years at 4.49%, and have fixed for 5 years in the past. I think there is a reasonable risk that variable rates will climb to around 7-8% during that time frame.

 

I have some fixed loans now and I have fixed before. Never longer than 2 years. I broke a fixed loan about 6-8 months prior to its expiry to refinance earlier this year and the penalty was pretty minor. I wouldn’t fix longer term as my situation continues to change.

 

It is about trying to manage the money. not about being that much ahead or behind.