Which rate do you get if fixing and RBA cuts before settlement?

Discussion in 'Loans & Mortgage Brokers' started by ftbmelb, 29th Oct, 2020.

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  1. ftbmelb

    ftbmelb New Member

    Joined:
    12th Oct, 2020
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    Location:
    Melbourne
    I've gone unconditional on a property with fullu approved finance. Settlement is a while away.

    Proportion of the loan will be fixed rate and the other proportion variable rate.

    If the RBA cuts interest rates next week as tipped and mortgage rates also fall. Will the borrower get the fixed rate on offer to the market at settlement -if lower. Or am I stuck with the fixed rate that was applied for at time of application?

    Thanks in advance.
     
  2. Morgs

    Morgs Well-Known Member Business Member

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    7th Dec, 2017
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    Location:
    Sydney NSW
    Depends on the lender, but keep in mind that often fixed rates are priced in ahead of any RBA movements.

    I'd be keeping an eye on the variable rate too and how the lender treats that as a pipeline change (not all are equal).
     
  3. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    14th Jun, 2015
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    Location:
    Gold Coast (Australia Wide)
    For the vast majority of lenders that dont offer rate risk insurance ( aka Rate lock fees) one will get the agreed rate.

    If the rate isnt rate locked, one will get the prevailing fixed on the day of settlement, which could be the same as agreed, higher or lower.

    Fixed rate pricing mechanisms are pretty much detached from RBA moves, and usually lenders have a limited amount of $ they have bought at market, and until they slice that bond up into small mortgage backed loans, the rate tends to stay the same.

    This is why the smaller lenders are more nimble with fixed rate changes, since they likely buy much smaller lots, more often.

    ta
    rolf