Andrew from Vista Financial

Mortgage rates - Variable, Fixed or Split.....

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    With interest rates sitting at a level where they have not been lower than they are now since the 90's where will they go from here.


    There is still a consensus with some that there will be a further reduction or two and this may be the case however it is now really about what the Banks decide to do rather than the RBA.


    The majors have been extremely aggressive of late and have been giving bigger discounts on their variable rates some as much as 1% off. They have also been aggressive on their fixed rates and several weeks ago one Bank reduced their 2 year fixed rate to 4.99%, soon after most of the majors followed.


    Generally it's a sign when Banks fixed rates are that much lower than their variable rates that they believe there are further rate cuts to come however one of the majors has recently announced that it's 4.99% 2 year fixed rate will end today in a manner that suggests it's new rate will be higher.


    So with variable rates around the mid 5%'s and 2 and 3 year fixed rates around the high 4%'s/low 5%'s where to from here.


    If your belief is that rates will continue to fall then perhaps having a variable rate is where you want to be so that you are able to take advantage of those rate cuts.


    If your belief is that rates will remain flat for a while or even increase then perhaps fixing that rate is the right move for you.


    However if you are not sure as to what will happen but do not want to miss out either way so to speak then it could be worth considering splitting your mortgage across a variable rate and a fixed rate.


    This is an example of how it might work:


    You purchase a property for $400,000.


    You take a mortgage for $350,000.


    You put half of that mortgage $175,000 on a discounted variable rate say at 5.5%.


    You put the other half of that mortgage on a fixed rate (say a 2 year fixed) at 4.99%.


    This will help shelter half of your mortgage against any future rate hikes or even if rates stay the same half is better off however if rates do happen to fall half of the mortgage will benefit from this.


    Most lenders in Australia will allow someone to arrange a mortgage (home loan) in this fashion but just be mindful of the fees involved if looking to do something like this.


    In most cases it is going to be a better option to arrange the mortgage as a package whereby you pay an annual fee and then any application/establishment fees and ongoing monthly fees are waived.

    Of course nobody really knows what will happen with rates for sure but this is one way that it might help from having to second guess things ( and stop any domestics :realmad: )



    Hope this helps,




    Edited by Andrew from Vista Financial

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