Hi Ozbargainers,
Fellow mate requires input on the new home loan application.
With the current interest rates skyrocketing now, I could find only the variable rates are within 2.1-2.6% where as fixed rates are above 3.8 for 2 years.
How do you go with new home loans if you need them in the current situation?
Fixed or Variable and what portions each would you do it now?
Or will you do with 100% variable and refinance later?
Thanks in advance.
Thanks
Variable rates would have to goto 5.5% in 12 months time for you to break even at that fixed rate
Just do the math, its not hard.
Sure, thanks for the info.
skyrocketing
Yes, an entire 0.25%.
Newbie here for loan. Everywhere they state it will go higher and higher, so just looking for how people would handle with their experience :) Looks like 100% variable now would be the best.
Depends entirely what you think it will go to, and how quickly. If it will go to 8% by Christmas, then locking in under 4% now would be a great idea. If it only goes to 4% by 2024, then locking in 4% now is a terrible idea.
Got it, I agree. Thanks for the feedback :)
Variable always wins in the long run if you can stomach the increase
I usually calculate my repayment on 7% - 8% rate and go variable
Thanks for the feedback.
As someone who used to work in the treasury team at a bank, my advice is generally to always go for variable unless you have a really strong reason to go fixed.
To go fixed is essentially betting against the bank / market. If you don't know how fixed rates work, basically the bank will use their in-house team (including PhDs…etc.) to forecast the yield curve (think of it as "expectations" of what future rates are), and potentially hedge exposure with interest rate derivatives. You can go for a fixed rate if you think you can beat the bank, but if you're really that good at forecasting rates, you might as well go get a job as a high-paid quant.
It doesn't mean that you will always lose when you take a fixed option. Just like you do not always lose at a casino. Just that the house (in this case the bank / markets) will have a house edge because of their informational asymmetry and better skills.
Makes so much sense and is obvious (once it's pointed out to you)..
Thanks a lot for your insights on this. I will go with variable rates in this case :)
As you have mentioned initially, go variable and be ready to refinance when you are able.
Banks have differing criteria when validating loan applications as well as overall processing times. You can use one bank to establish a loan, and then move to another for the lower rate/cashback features. Figure out what each banks value proposition is to you, but never hang around for a long time.
The current rates are the current rates, they are not really a variable that you can directly control.
Being familiar with why and how to refinance is a valuable lesson and is something you can control. Jumping to a new bank ensures that you are able to access the best rate currently available. Succumbing to complacency will inevitably result in higher interest rates after not too long. A simple generalisations is that banks will never give an existing customer a lower rate than a new customer. Negotiating with your existing bank is a painful exercise in bank doublespeak and jargon.
Fixed loans mean you can't take advantage of those enticing cash back offers! I bough and sold a house in a 9 month window and managed to squeeze a 4K cashback in.
Thank you so much for the valuable inputs. I'll go with variable and look for refinance options later.
I can't see the RBA raising rates to high as they'll crash the housing market and send the country spiraling into a deep recession. Variable for mine,
If they leave inflation unchecked, that will also lead to a recession.
Thanks.
allow for 8-10% coming
Thanks.
Make sure to 🔒 in the $1M loan before the next rate hike.
Sure, thanks.
Go variable 100%