Home Loan Refinancing

LRajgowda on 18/03/2023 - 15:27
Last edited 18/03/2023 - 15:43 by 1 other user

Hi all, I hope you're doing well.

I am reaching out to inquire about my mortgage situation and seek some advice.

I currently hold a fixed-term loan with CBA, which used to be at an interest rate of 1.89%. However, this term has expired, and CBA is now offering a new fixed-term loan at an interest rate of 5.89% for three years. Is this a competitive rate in the current market and whether I should consider fixing it for three years, or explore other lenders who might be offering rates lower than 5.89%?

To provide some context, the property in question has an estimated value of approximately $700,000, while the outstanding loan amount sits at $555,000.

• 

  Shoocat on 18/03/2023 - 15:30

  +3

  Always explore other lenders. You'll never be rewarded by any major bank for being a loyal customer.

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  avoidfullprice on 18/03/2023 - 15:39

  is this a competitive rate in the current market

  For fixed rate from major banks, not too bad. But it is higher than current variable rate products and some fixed rate products by non major banks

  whether I should consider fixing it for three years

  That’s a crystal ball question whether this is a good rate to fix at

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  redfox1200 on 18/03/2023 - 17:21

  +3

  not worth fixing for 3 years

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  Iwantthebestprice on 18/03/2023 - 18:02

  5.8 is ok in current market for a fixed rate for 3 years. You can get slightly lower for variable

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  Ocker on 18/03/2023 - 18:13

  Go floating at around 5%.
  Have you had the property valued lately because your LVR is hovering on the 80% ratio. If the property value is now less than $700k you could be up for a higher rate and/or LMI

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  soan papdi on 18/03/2023 - 18:37

  +2

  TicToc is 4.79 variable. Why pay 1% more for fixed?

  • 

    onetwothreefour on 18/03/2023 - 18:53

    Variable might go that high by end of year, also might not. That's the gamble you take with fixed rates.

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  Cherry12 on 18/03/2023 - 20:47

  +2

  I wouldn't fix it for such a long time at that high rate. It will all depend on your specific finances though. Some banks are offering less rates (fixed and variable) if you refinance, even are giving cashback. Shop around and you'll get a better rate.

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  Malik Nasser on 19/03/2023 - 13:03

  +1

  As rates have already gone up substantially, and futures implied cash rate is currently showing that rates are close to their peak, I would suggest going with a variable rate loan.
  https://www.asx.com.au/data/trt/ib_expectation_curve_graph.p…
  Its possible rates could go up further, but not likely to be much more.
  If unemployment goes up and the economy starts to stall, the RBA will likely look to start lowering rates (possibly late this year or early next year).
  Anything is possible, but for now I think the smartest bet is to go variable.

  • 

    Extreme on 21/03/2023 - 18:07

    ASX Cash rate futures are suggesting a 46% of a rate cut in April.

    Fixing now would be absolute insanity.

    • 

      Malik Nasser on 21/03/2023 - 22:45

      +1

      Market expectations have changed dramatically recently, and are all over the place.
      I wouldn't put too much hope on a rate cut just yet (futures markets can be fickle).
      With inflation still so high, the RBA will be hard pressed to cut rates.
      My expectation would be for them to stay at current levels for a while, until inflation is well on a downward trend.
      For the RBA to start cutting interest rates now, that would indicate they foresee something big on the horizon.

      • 

        Extreme on 22/03/2023 - 07:57

        +2

        Of course.

        I personally don’t see a rate cut happening this soon. But it’s not far over the horizon.

        The fact is, the economy and inflation is starting to contract.

        Interest rates are either at, or very near the peak terminal rate. This is why I feel fixing now would be absolute insanity.

        I also believe, the higher the RBA increases the cash rate now, the harder it will need to drop once inflation has reached or is nearing the 2-3% target.

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  GuyfromMelbourne on 20/03/2023 - 18:25

  Fixed rate or variable rate option should be chosen based on risk appetite and not trying to find a better deal. If you can survive 1-2% increase in the next year or 2, stay variable. If you can’t then fix for certainty. CBA normally is most expensive, so look for mortgage broker on ozbargain and let them find you the best deal.

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  MrMarket on 20/03/2023 - 18:35

  +2

  statistic show you ALWAYS win with variable if you can afford hold it in all rate cycles (both up and down)
  fixed if you can't handle uncertainty and possibility of increase payment.

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  bonus on 21/03/2023 - 15:19

  Who gave you the estimated valuation of $700k?
  From banks POV if they have to sell and liquidate today, the value would be very conservative minus 10-20%.
  Don't expect great rates if you don't have lots of equity in your home.

  Banks might give you a lower rate, by resetting the loan back to 30 years instead of say 20-25 years.

  From 1.98% to 6.25% on a loan of $555k, its an increase of about $1500.00 per month or $18k per year to maintain your loan. That's after tax dollars.
  At 1.98% the mortgage repayments is about $2045.00 per month @360 months
  At 6.25% the mortgage repayments is about $3555.00 per month @324 months