DunRoaminTheUK

Do you have any plans to move from a variable rate to a fixed rate mortgage anytime soon?

breezeboylan

We already have a fixed rate, stuck at 8.49%
Tracie

DunRoaminTheUK

Ouch....

How much to break the agreement?

breezeboylan

$29k and that was before the interest rate cut this week, so it would be even more now.
Tracie

northernbird

Our 3 year fixed rate at 7.15 expires in June. I think we will look at fixing as hopefully then we may have had another rate cut.

asprilla

some things to think about re: fixed rate loans....

1) the longer the duration of the fixed term, the higher the interest rate. If the RBA put the cash rate down to 2%...don't expect to be able to lock in 4.5% for 10yrs... far from it!!!

2) The margin between the RBA cash rate and the bank rates seems to be relatively stable at about 1.5% to 1.75%......e.g. cash rate is now 3.25%, you can get a loan for 5% (or less if you are lucky). I wouldn't expect this to continue if the cash rate drops even further....e.g. if cash rate reaches 2%, variable rates will only go to 4.5%.

3) This chart is interesting and it is updated daily...
http://www.asx.com.au/data/trt/ib_ex...urve_graph.pdf

4) The variable rate usually changes when the RBA change the cash rate. The fixed rates usually change in tandem with changes in the chart above.

5) If I was going to change to a fixed rate, I would probably wait until the RBA were making increases to the cash rate.

DownUnderPaddy

Determining which one is better is as simple as looking at your ability to handle risk…

If you loose sleep worrying about the possibility of a .25% increase in the interest rate or get stressed thinking about the impact on your monthly budget if your monthly mortgage payment changes, then a fixed rate mortgage is for you.

If risk is not as much of an issue, then a variable rate mortgage is the way to go.

Long term, you will always pay less interest overall through a variable rate rather than ongoing fixed rates.

jayr

People traditionally seem to choose fixed rates for fear of increasing rates. Clealry these are the people who now paying for that with rates fixed above the current variable rate.

Given that people at banks are paid to be "informed" about future interest rates it seems they are always more likley to be the winners than the people who choose to go with fixed rates.

Its a bit like currency hedging, some people are paid tot do that and that only; why Joe Public thinks they can do better is beyond me.

DownUnderPaddy

Agreed. Here's a current article that some on this thread may find useful :

Fixed vs variable: backing the right one
Written on Jan 16th 2009
http://money.ninemsn.com.au/article.aspx?id=706317

comet555

I have no issues with the variable rates. I was a bit annoyed when they kept going up but we bought a lesser house than we could afford so that we wouldn't have a problem if the cost rose dramatically.

I voted that I wouldn't bother switching to a fixed rate. Mostly because I know we'll probably sell the house in another year or two so not much point in fixing it. But I've always been more of a fan of the variable rates.

jayr

And the article pretty much ends by saying that fixed rate loans are now availbale at BELOW current variable rate, so maybe people should lock in. That seems odd given most of the article is about people locking in fixed rates only to watch the variable rate fall.

Clealry any bank offering a fixed rate BELOW current variable is doing so becasue the bank thinks rates will FALL. In fact the bank thinks rates will FALL below the rate they are offering as fixed.

It is a pity the journalist writing that articel couldn;t understand this simple principle.

DownUnderPaddy

Here's another article form yesterday on the subject.

More people to fix as interest rates come down, experts say
February 06, 2009 12:15pm
http://www.news.com.au/business/mone...-14327,00.html

PoppetUK

We fixed for 1 year which ended in Sept / Oct. I just remember pooping our pants because the jump was silly. The rate went to 9%.Thank goodness for us the rates have dropped and dropped. It's about $1000 difference already.

Wendy

I'm just going to go with it, I have never been finacially savvy, and I don't intend to start now. We are still paying the higher interest as I don't miss the money and it means we pay the mortgage off quicker. We have already got it down from 30 years (which is the terms we originally agreed to) to 15 years and 4 months after just 22 months.