31 July 2014,
 0

fixed-rate-mortgageCommonwealth Bank made big news last week by making the first move and cutting their five-year rate to 4.99%, but.. only if you pay their annual fee…

 

The press made out to be this big thing that they were so wonderful and cut the rate by 0.7% down from 5.69%. the reality is that previously it was rubbish and way behind a lot of other lenders.

 

What did not make as much noise in the press is that their rate was then matched almost immediately by Westpac and NAB. So we now have Combank, Nab, Westpac, Citibank, Suncorp, St George and some other smaller lenders like Homeloans Ltd and Heritage Bank are sitting on 4.99%

 

Newcastle Permanent – actually they reduced their 5 yr fixed to 4.95% for 4 & 5 years (and coincidently have introduced a cash back of $1,000 if you switch to them.

ME Bank are 4.94% for 5 years.

What does this all mean?

Fixed rate loans offer excellent value if you are seeking interest rate certainty. And they are at an all-time low. Generally speaking when the fixed rate are near or below the variable rate you are getting a good deal.

Variable rates: you should be paying less than 5% on Variable rate, so make sure you look at your loans this weekend (or right now…) and make sure they are.

Call me or click here to request an appointment to get a FREE home loan health check.

Be Careful.

What is better for you?

Please don’t just jump into a fixed rate without considering your potions. You need to understand your objectives and what your 5 year plan is.

For example under a fixed rate you cannot generally pay much extra into the loan, if you do you can pay a significant penalty fee – make sure you understand what  you are signing up for and what the limitations are.

Make sure you take into account any fees involved like annual fees or switching fees.

Fixed Rates vs Variable Rates

In general:

Variable Rate Loans

  1. You can pay unlimited extra repayments without penalty
  2. You can redraw this money at any time if you need
  3. No real restrictions if you need to sell your home

Fixed Rate Loans

  1. Restrictions  to how much extra you can pay per month or year
  2. penalties will apply if you pay too much
  3. You cannot access the extra repayments for the period of the fixed loan
  4. if you need or want to sell the house again there are penalties
  5. make sure you are aware of what happens at the ned of the fixed period, generally banks will put you on (or you revert to) a high variable rate like 5.88% as that is policy, it is a lazy man trap so be careful.

 

What should I do?

Don’t jump into a fixed rate loan without considering your potions, eg maybe a 3 year fixed rate loan is better for you.

Maybe consider a split loan of part fixed and part variable.

Definitely consult a professional who understands what the lenders options are and listens what you want to achieve and then gives some solutions that ate best for you. You don’t need to do it on your own.

I hope that gives you a bit of an

Call me or click here to request an appointment to get a FREE home loan health check.

Cheers

David Johnson – The Home Loan Guy

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