Interest Only with 100% offset account

Was looking to switch from P&I to fixed IO with Bankwest however I found they only offset at 40% of what you have in your offset account. Is this normal practice do other major banks offer 100% ? They all seem to hide this info on their product pages or don't have this.

I guess if you don't have much sitting around in an offset it doesn't make much difference. In my case I took out a large chunk of equity as cash sitting in the offset ready to be used as down payments for IPs.

 

Yeah most are 100%

 

No it's only 40% for IO fixed. I confirmed with them.

Currently I'm P&I variable with 100% offset.

 

BW only offer 40% offset for fixed rate - most majors don't offer any offset at all, so 40% is better than nothing.

If you want to retain the offset, split the loan first and leave a portion variable.

 

Adelaide Bank offers 100% offset against fixed rate products ...

 

Thanks got it! So it is a positive not a negative.

So I assume the reason why everybody would not flock to BW for IO fixed is that your not going to have much cash sitting around in offsets anyway when you are actively investing. Most cash will be used to towards more purchases/maintenance however I do understand the need to have a buffer for contingencies?

 

Most people probably don't flock to BW because most people leave some portion of their loans as variable to be offset 100% instead of 40%. Also BW are notorious for their bait-and-switch rate tactics. They often end up significantly more expensive than other lenders.

 

My broker was looking to put me with Bankwest, how do they Bait-and-switch?

 

Interestingly enough they did increase my rate immediately after everything was settled citing rate changes with RBA!

 

About every 18 months to 2 years they change their primary product to something with another name. The previous product gets more expensive very quickly.

Certainly most borrowers who've had a loan for a couple of years are possibly paying a bit more than new customers, but they've still got some sort of discount. Many people with older BW loans signed up for a market leading rate product and are now paying higher than the equivalent standard variable rate. It's like they were sold on a rate of 4% and are now paying almost 6%.

BankWest has done this consistently since 2007 to every product.

In my mind, there's one of three scenarios when taking a loan with BankWest:
1. There's a particular policy niche that makes them best suited to your circumstances (which is quite legitimate).
2. The broker isn't that experienced and hasn't recognised the pattern.
3. The broker is selling you on a cheap headline rate without real consideration to the longer term implications. The cheapest rate rarely means it's the cheapest product.

 

Sounds like another GE? :/

 

IO, Fixed AND an Offset. That's 3 cherries on that cake you're eating.