Fixing interest rate

If you fix your loan, do you lose the discount you had on your variable rate? So when the fixed term finishes, do you still retain your discount?

I have recently fixed one of my loan and on the statement it says "End of special client price -1.40%"

 

I have dealt with them, can be painful. Took me a while to get some things at the right rates and some staff meddled with loan package without asking....grrr

If you want to do better, check your LVR.

 

Yes, you will go onto whatever is happening at the time.

You could try asking for the old discount, but if things keep going the way they are you will have buckleys and none

 

I know with STG you will lose your current discount rate if you decide to fix your interest for any period. Once that period expires you will revert to the going rate at that time.
I am currently on 1.3% discount and was told the going rate atm is 0.8%, (maybe could push to 1% depending on how much debt you will carry) so decided to max out my I/O period instead (current rate is 4.37% with loan < 350k under package).

With my CBA debt I fixed loans (2 yrs @ 4.19% under MAV package) that were secured against properties that I knew were 'set & forget', i.e. don't plan on selling or pulling equity from in the next 24 months and had no money in the offset account (This also means I lose 100% of the offset facility for these loans during the fixed period).
I made this decision because I have another loan (which will remain I/O) with an offset so any additional funds can be used to offset that debt.

I also did not fix any loans that have funds in an offset (such as from equity pulls) that are to be used for the next purchase. Once these funds are used I will probably consider fixing them as well depending on what is offered at the time.

I was told with CBA, once the fixed interest period expires, you will still revert to your original discount (mine is 1.3% for the life of the loan). Not sure if this is correct so best to check with your broker.

 

This is correct with CBA

 

Well, I ended up fixing 2 of my current IP variable rate IO loans, and still keep them both as IO - one for 3 years and one for 5 years.

Neither of them have an offset against them, so I didn't lose anything there, and the fixed rates I got for both of them was lower than their current variable rates, so I'm pretty happy.

I know that a crystal ball would be nice, and hindsight may end up being nice a few years from now, but with the shenanigans that the APRA, the politicians, and the banks, are currently pulling with investor lending etc, I thought it was a safe call.

 

I have set and forget loans with CBA. Would there be any other consequences of fixing rates other than you don't get a 100% offset? What do they change to?

 

Not sure if I understand this correctly but most of my fixed loans will revert back to I/O. I'm told with CBA they will allow another 3 years which is 1 more than most other lenders are giving.

Again, best to check with your broker.

 

The main issue is the offset not functioning as previous AND if you break a fixed rate there can be a break fee applicable.

Theres a significant price differential between variable and fixed rates for investors at this time - we've been doing literally dozens of these a day for clients and people on the forum who've asked for assistance right now - pushing out IO terms to fresh 5 year periods and fixing them at their preferred fixed period. Nice and simple process to do and will future proof your borrowings over the next few years of uncertainty. It's best to make use of the ease of ability to change and extend while you can before this is regulated away.

 

Thanks KayTea.
May i ask what rates you got for 3 yrs and 5 yrs and how much for and with whom?

 

In general your looking around 4.19 for 2 yrs IO with CBA at the moment. Others have similar Ian and another 10 points or so for 3 years.

 

thanks Jess, and for 5 yrs?

 

It's higher for 5 yrs I'll have a look when I'm back in the office

 

The 2 years fixed rate is the lowest rate with CBA at the moment at 4.14%. I'm thinking of fixing my larger loan for 2 years as advised by my mortgage broker. It is lower with the MAV package at 3.99% so I think it is better to phone them directly to ensure this rate is locked in?

 

They are OO rates, not for IP's.

 

Best pricing for 5 years fixed is around 4.49% through a few smaller lenders.

 

On the CBA Page https://www.commbank.com.au/content...oad-printed-forms/home-loan-update-002842.pdf, it shows Fixed Rate having a 1.5% Partial offset.

What does that exactly mean?

1.5% of the amount in the offset account (ie if i have $100,000 in offset, then only $1,500 is fully offset?)
1.5% of the loan is subject to a full offset?
The interest rate of the offset account is 1.5% as opposed to the interest charged by the bank

 

So if I can fix rate with CBA at 4.3% over the next three years, that means the bank is confident the rates won't go up higher than 4.3 over that period? Isn't that quite unlikely with the increase of funding costs lately?

Cheers

 

Agreed.
Fixing is a cash flow strategy - not how do i beat the banks strategy.
The house always wins.

 

I don't want to predict future rates (or if I do my prediction is worthless).

However the bank wants to generate the most revenue they can from a home loan product. If you fix a rate you are transferring the risk of future rates rises to the bank. The bank will want to be compensated for that risk and they will factor that into their interest rate.

And I have evidence to prove that you will be better off to have variable

https://www.ratehub.ca/docs/mortgag...cing-floating-your-way-to-prosperity-2001.pdf