Is it worth pay fee to lock mortgage rate

I'm refinancing at the moment with NAB and wondering whether its worth locking the fixed 2 year rate. The cost of it (0.15%) is coming cut almost half the savings I'd get each year from the better interest rate (0.32%), add in the exit costs for current bank, the savings go down a bit more

Question is, what are the chances the interest rate will rise in the near future (eg.3 weeks) ?
what would you do ?
thanks

 

If rates increase by 0.1% between now and settlement, it will be money well spent. Otherwise it'll be a complete waste. Financially speaking, it's that simple.

Rates might increase tomorrow, they might not increase for another month. I could find economic data to support either case. Anyone who tells you definitively which way it will go, ask them to split the loss between you if they're wrong.

If the settlement was in 2 months, I'd probably pay the fee. In 3 weeks I don't really know either.

 

If anybody knew a few weeks in advance what rates were going to do, they wouldn't need their day job anymore.

 

It's a gamble at the end of the day. A few questions I'd ask myself are -

Has my lender recently raised fixed rates - ie, in the last couple of months? If not, have other lender raised theirs? If my lender was the only one that hadn't raised it, I'd think about locking.

If fixed rates were to rise by 0.25%, what would your new fixed rate payment be?

What is that, compared to the current variable payment you're trying to reduce? If it's similar, you'll be no worse off than currently.

Just a couple of thoughts to see if it's worth locking in.

 

Banks no longer wait about for the RBA. I would think the issue is fairly trivial for the margins indicated and the short 2 year period. You would want to be tipping a really substantial rate rise and the economy isnt looking like a boom. Latest economic data doesnt suggest rates will go up....Lenders margin could be increased BUT typically thats a small factor in rate changes ie under 0.10.. Three weeks ? Hardly worth it but......

Just my view

 

Remember any costs, or savings for that matter are shared with the ato at your marginal tax rate.

Fixing is a strategy to reduce risk, a form of insurance in effect. A rate lock fee is simply an extension of risk mitigation.

 

On $100,000, cost of rate lock is $150, but if the 2 year fixed rate goes up by .15% then cost over 2 years if you didn't lock rate is $300.

As others have said, it is a gamble, but maybe one worth taking if you think fixed rates may go up.

 

If you decide not to lock - just ensure that your broker/banker is working as quickly as possible to get the new loan settled quickly.

Cheers

Jamie

 

Thanks everyone, its going to cost me about 1.5k.
And though I actually think rates will hold in short term, I'm going to lock it. Firstly as it is an investor loan and those rates are in a bit of a flux right now. The three weeks is probably at best, and whilst it should be pretty straight forward refinance, how people work is out of my control
And I know its not a big amount in the big pic, but that's a lot of smashed avocados to me