Advice on Home Loan Refinancing

Lkashewnut on 11/06/2024 - 13:31

Hi everyone,

My wife and I are about to come off our 3-year fixed interest loan, and we’re looking at refinancing options. Our current setup is 80% on a fixed rate (1.97%) and 20% on a variable rate (6.49%). The bank is offering 6.90% when the fixed rate period ends. Of course, we will be looking to negotiate and shop around as well.

Total amount to be refinanced is around $530k. The property valuation hasn't been done by the bank yet, but it's estimated to be around $700k according to Realestate and Domain.

I was hoping to tap into the collective brains here at OzBargain to get some advice on whether we should be looking to get a fully variable rate or a mix of fixed and variable. I was leaning towards fully variable but would love some perspectives and thoughts.

Thank you.

Poll Options

  • 40
    Fully Variable
  • 1
    Fixed + Variable (Fixed > Variable)
  • 1
    Fixed + Variable (Variable > Fixed)
Financial Home Loan

Comments

  • geekcohen on 11/06/2024 - 13:39

    Our fixed rate period ended in December 2023 and we are on fully variable now (6.14%). We will lock something in when it drops down. We are around a similar loan amount to you.

    I hope you are prepared for the jump in repayments, it's hurt us a lot.

    • kashewnut on 12/06/2024 - 09:24
      +1

      we have been doing repayments since we got the loan as if we are on 7%, so hopefully it will be a seamless transition

  • Duckie2hh on 11/06/2024 - 13:44
    +3

    Why fix?

  • Cherry12 on 11/06/2024 - 13:44

    Fully variable until the fixed rates come down to a decent number. Don't want to be tied up to a high % for 2-3 years.

    • freefall101 on 11/06/2024 - 13:56
      -6

      China invades Taiwan, inflation skyrockets, interest rates hit 15%.

      There's still a chance of another rate rise and an extended period of time until they fall again. Personally, I went fixed at the start of last year because it at least took the risk out of it, although that was when we were still clearly facing more rate rises at that time (I locked in at 5.4%).

      Main thing for OP will be shopping around, 6.9% is way too high and makes the fixed/variable discussion a moot point because they're getting screwed by at least half a percent.

      • Cluster on 11/06/2024 - 14:45
        +7

        If China invades Taiwan, the interest rate on your mortgage will be a minor concern.

        • freefall101 on 11/06/2024 - 14:50
          +3

          True, my GPU will probably be worth more than my house at that point.

      • Cherry12 on 11/06/2024 - 20:35

        Unlikely that the rates will continue increasing for the next 2-3 years (time of a usual fixed contract).

        Obviously, it is a risk but I think it's riskier to fix at a higher %.

  • djkelly69 on 11/06/2024 - 13:44

    We came off a similar split around this time last year, with a similar LVR (ie. bit below 80%). We are with a Big 4 bank and they rolled us onto a full variable about 6.15%, and looks like we are now on 5.99%. So I think you can do much better than 6.90% on the interest rate.

    • JimB on 11/06/2024 - 14:13

      5.99% is a very good rate without asking.

      • djkelly69 on 11/06/2024 - 14:25
        +1

        My broker does a 'rate check' or something every year to basically ask them if they can do any better, and it seems to work as they have reduced a couple of times over the last few years.

  • Cluster on 11/06/2024 - 14:12
    +6

    I fixed at 1.75% in early 2021 when it was clear rates couldn't go any lower. It was a wise decision.

    I personally wouldn't fix now. Do you think rates can go higher from here? It's always possible, but I think the trajectory is down from here. Many Australians are already hurting at 6.x% rates and would be driven to the wall by 7.x or 8.x.

    You should have no problem securing a 6.1% or so rate with a variety of lenders with no fees.

    • kashewnut on 12/06/2024 - 09:27

      yep! thanks for the feddback.

  • Gdsamp on 11/06/2024 - 14:54
    -2

    expect a rate cut by end of this year, maybe another one by mid-next year.

    Jimbo has worked out he can fudge the CPI numbers down by spending tax $ on energy bills. import more ppl so gdp growth can be more than the lethargic 0.1% maybe next qtr.

    Market pricing in a Trump victory in November. probably alp minority govt here next yr

    • JIMB0 on 16/06/2024 - 08:23

      If it was up to me I'd put the rates up.

  • ttt888 on 11/06/2024 - 15:26

    During pre-covid, very rare anyone can win by locking their interest rates.These was proven over and over.. Now all of sudden due to covid, people thinks they can win against the banks and thinks about locking in their rates.

    It takes something as severe as a Covid event to make this happen.

  • Drakesy on 11/06/2024 - 15:53
    +2

    I love that the RBA has backed themselves up against a wall.

    An Increase in spending by a certain demographic is outpacing the spending cuts made by those getting hammered the most by rate hikes. And guess where they're dumping all their new found wealth…

    House prices are still high/increasing

    Inflation is still outside the band that the RBA are chasing, imagine failing to get it back for years and still keeping your job. HOW GOOD.

    I don't see rates coming down for at least 12 months.

  • apple2016 on 11/06/2024 - 16:42

    Go variable and shop for a good rate. I dont think rate will increase, but if it comes down you will get the advantage sooner.
    I recently refinanced with BOM for 6.10 at 80%LVR

  • JIMB0 on 11/06/2024 - 17:23

    What state are you in?

    • onetwothreefour on 11/06/2024 - 19:41
      +6

      Confused

    • kashewnut on 12/06/2024 - 09:25

      accoring to a recent reddit post, the only state you could name your child after.

  • localhost on 11/06/2024 - 21:18

    Fully variable + offset. You should be able to get something around 6%. Check also mortgage brokers.

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