# Have you fixed your home loan? Yes or No?



## tronic72 (23 December 2007)

With at least two more interest rates planned for next year (many are saying 4 is more likely) I was wondering how many members have fixed their homeloan rates. Please give reasons for fixing or not fixing and remember there is no right or wrong.

We fixed ours prior to the last rate rise so we are locked in 6.5% for 3 years. For me it was a no brainer as there was 90% chance of an increase. It took a single phone call to do. Easy


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## numbercruncher (23 December 2007)

Pretty much thanks to the "system" average Australians are financially Illiterate, hence only 21pc of owner occupied mortgages being fixed .....

I think the "sheeple" take literally politicians pledges of keeping Interest rates low .....

Understanding the financial system should be mandatory before people are allowed to leave school or emigrate to Australia ....

Im sure 4 interest rate rises would push thousandsand thousands already at peak debt into the abyss


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## hangseng (23 December 2007)

I have 3 loans and all were fixed at 6.25 and 6.5% some time ago still allowing for additional lump sum principal payments. When they expire I will revert to offset accounts. The ANZ look after me on fees as well now due to the large volume of business I produce to our mutual benefit.

I have used this strategy successfully for years. Shame I wasn't that clever in the 80's.

5 years to early retirement.


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## SM Junkie (23 December 2007)

I've had my property loans fixed for a few years now and my current development will be on a fixed loan as well.  My theory is that you can always refinance if interest rates drop, but based on our spending habits still being extremely high, I don't see that happening in the near future.


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## Rocket man (23 December 2007)

I just had a house built and took a variable construction loan over a year ago as found most institutions dont offer fixed rate on these loans. Got stung with some rises but built now, so looking to fix in Jan08 for maybe 2 years .. There is a lot of upward pressure on rates now and I dont see any significant economic slowdown hitting Aus any time soon


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## tronic72 (23 December 2007)

numbercruncher said:


> Pretty much thanks to the "system" average Australians are financially Illiterate, hence only 21pc of owner occupied mortgages being fixed .....
> 
> I think the "sheeple" take literally politicians pledges of keeping Interest rates low .....
> 
> ...




Was that a yes or a no???

PS.What is sheeple????
PPS. I agree that some finacial education should be compulsory in School. My younger brothers generation (gen Y) doesn't have a clue when it comes to saving money. Not a single one of his mates saved a deposit for a home with parents or 110% loans seeming to be the way they go.


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## numbercruncher (23 December 2007)

> Was that a yes or a no???




No debt until a clearer picture of current climate emerges, always looking for bargains though!



> PS.What is sheeple????




Devotees of Bubblevision



> PPS. I agree that some finacial education should be compulsory in School. My younger brothers generation (gen Y) doesn't have a clue when it comes to saving money. Not a single one of his mates saved a deposit for a home with parents or 110% loans seeming to be the way they go.




A sign of whats to come


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## Smurf1976 (24 December 2007)

I have a "no frills" cheaper variable rate loan with a major bank. 

I chose not to fix since I want the flexibility that comes with variable. I can easily afford to, and do, put 50% of my base pay plus 100% of all other income (which is significant) into repaying the loan.

That the "other income" part is reasonably large means that practically each repayment is a different amount so it would be difficult to have any loan that doesn't allow regular additional repayments (many fixed loans have a $10K annual limit on this which would be too low).

That said, I would certainly have fixed if I was planning on a fairly constant level of repayments and/or I had a loan that was large relative to the house value (ie over 50%).

I don't pay any fees on this loan - big banks WILL negotiate if pressed.


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## BraceFace (24 December 2007)

Problem is, if you choose to swap from a variable rate to a fixed rate, you IMMEDIATLEY take on a rate hike.
Standard variable rates are always cheaper on any given day than the going fixed rate.
Therefore, if those 4 rate hikes don't materialise, you're actually worse off.
Bit of a gamble really.

I'd stick to variable rates on home loan and fixed rate, interest only on investment loans (tax deductable).


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## Tysonboss1 (24 December 2007)

BraceFace said:


> Problem is, if you choose to swap from a variable rate to a fixed rate, you IMMEDIATLEY take on a rate hike.
> .




what ,....

When I fixed three of my loans, the interest rate dropped, it's a timing thing


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## chewy (24 December 2007)

I'm sure I read a survey somewhere that showed that on average those on variable rates do better than those on fixed over the long term. 

Anyway fwiw I am on a 'no frills' variable that gives 0.7% discount off from the standard variable rate.


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## theasxgorilla (24 December 2007)

10 years fixed at 4.56%.


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## numbercruncher (24 December 2007)

theasxgorilla said:


> 10 years fixed at 4.56%.





WOW - nice work !


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## theasxgorilla (24 December 2007)

BraceFace said:


> Standard variable rates are always cheaper on any given day than the going fixed rate.




Is that true?  I thought I'd seen situations where fixed rate loans for certain periods were lower than the going variable rate.  I also thought that this represented a bet by players in the debt markets that they thought interest rates would go down rather than up during that period.


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## Ageo (25 December 2007)

BraceFace said:


> Problem is, if you choose to swap from a variable rate to a fixed rate, you IMMEDIATLEY take on a rate hike.




really?? hmm lets see as thats what my last broker told me.

I started with him at 7.25% and after all the rate rises i ended being @ 8.50% (on my home loan!) so i decided to use another broker which then got me on a "fixed" 5yr rate of 7.99% saving me 0.51%

So how is a standard variable higher then a fixed rate???

P.S the refinancing fee's have been removed also


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## spartn (26 December 2007)

Personally I believe it depends on your current situation.

Personally I see interest rates going past 8.50% sooner than people think, with all the credit hungry people out there who are spending billions on credit card debt, people really shouldn't be suprised if it does.

At present I will have no problem paying off my mortgage, at present i am able to put just a bit over double the minimum monthly payment the bank requires, which is not making my Bank happy.

If you ask me people really should start to put as much as possible now into their mortgage now, some of the experts are saying that inflation could probably reach 4% next year, if that occurs we might even see 3 interest rate rises in ther new year.

Spartn

:viking:


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## ithatheekret (26 December 2007)

I don't have a mortgage , just a series of rate bills .

I did , help a close relative set up a home loan entry , using the HOG and the State HomeLoans process , the loan was fixed for a period within the term of the loan , which was 23 years .

It leaves them ample cash in hand from wages to diverify and use the funds for alternate instruments and vehicles of investing .


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## The Mint Man (27 December 2007)

tronic72 said:


> We fixed ours prior to the last rate rise so we are locked in 6.5% for 3 years. For me it was a no brainer as there was 90% chance of an increase. It took a single phone call to do. Easy



Fixed for 3 years about 1 1/2 years ago.... you must have about the same time left as me?
We fixed at 6.84% however it went up to 7.04% before the fund date,  apparently this was how things are done. Of course I didn't lie down and take it and complained about the fact we were not told that for $250 we could have had it locked from the moment we signed, the guy we dealt with was an absolute dill on MANY levels! I went as far as to say to his boss that they should sack him.
But you wouldn't believe this... a few days before christmas we got a letter saying the they had reviewed our loan and that there was a mistake. It said that on the fund date the interest rate went up and that under our contract the previous days interest rate should apply they refunded us the extra money and interest we had paid up until now!
Couldnt believe it

So even though it came late.... better late then never, thank you CBA

Cheers

PS -  this should have been a poll.


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## DB008 (27 December 2007)

Half fixed, Half variable. 
But, all of loan is interst only with additional lump sum repayments only been allowed on the variable part. Damn u RAMS!!!
I was going to refinance with one of the major banks (as l have had way to many problems with RAMS. To many to list. And the guy that set up my loan was a DILL to!)

 From a personal point of view, l would NOT to go through RAMS again. Refinance fee is on a sliding scale for the first 5 years too. Something like 2.5% of loan at start as a early repayment fee ie; refinance fee. 

Hey theasxgorilla how did u get 10 years fixed at 4.56%? And who with?? I saw that CBA came out with a 15 year mortgage some time ago.


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## numbercruncher (27 December 2007)

> RESEARCH shows that many Australian borrowers wrongly believe that retail banks can’t raise home loan interest rates if the Reserve Bank doesn't move the official cash rate.
> 
> Although movements in home loan rates generally follow the Reserve Bank, the banks can move independently – and lately they’ve been hinting they’re planning to do just that.
> 
> Research by online home loan lender myrate.com.au showed that 60 per cent of Australians would be caught off guard if home loan rates rose outside of an official movement by the RBA.







> A recent report by JP Morgan said big four banks were losing profits of almost $600 million a year by not passing on the higher funding costs to borrowers.




http://www.news.com.au/business/money/story/0,25479,22953432-5013952,00.html?from=mostpop

I reckon a raise is all but certain in Jan, The losses for the banks from the Centro meltdown need to be offset too im thinking


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## professor_frink (27 December 2007)

numbercruncher said:


> Pretty much thanks to the "system" average Australians are financially Illiterate, hence only 21pc of owner occupied mortgages being fixed .....
> 
> I think the "sheeple" take literally politicians pledges of keeping Interest rates low .....
> 
> ...




Why would you say that only financially illiterate people wouldn't fix their interest rate


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## numbercruncher (27 December 2007)

professor_frink said:


> Why would you say that only financially illiterate people wouldn't fix their interest rate





Im not saying that , my point is saying most people arnt taught anything about how things such as Inflation and Interest rates work, they watch the Television and listen to politicians pledging low Interest rates and take it as gospel. Bit of economic/political study should be compulsary while at high school.

It was becoming blatantly obvious about a year ago that we are entering a period of High Inflation and rising Interest rates.

Johnny can take the brunt of the blame imho 

Heres an article relating to the point im making ...



> A COMBINATION of confusion and lack of financial literacy is keeping Australians trapped in expensive home loans.
> 
> Research by online home lender MyRate.com.au shows that a quarter of Australians are so confused about home loans that they will not bother shopping around.




http://www.news.com.au/business/money/story/0,25479,22905956-5013952,00.html


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## numbercruncher (27 December 2007)

> THE major banks are stealing as much market share from mortgage brokers as they can before putting up their variable-rate home loans.
> 
> The banks raised the value of new home loans approved in October by 5 per cent, while the value of loans offered by non-bank lenders fell 16.2 per cent.
> 
> ...




http://www.news.com.au/business/money/story/0,25479,22904053-5013952,00.html


Sneaky banks eh ?


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## Judd (27 December 2007)

chewy said:


> I'm sure I read a survey somewhere that showed that on average those on variable rates do better than those on fixed over the long term.
> 
> Anyway fwiw I am on a 'no frills' variable that gives 0.7% discount off from the standard variable rate.




I recall it was published about two years ago.  Unfortunately, I forget which University did the work.  It was an analysis of 3 year fixed rates versus standard variable rates over a 20 year period.  The upshot was that due to timing issues most would have been better staying with the variable rate.  However, I don't believe that the analysis took account of the basic variable rate as those items were introduced part way through the survey period.

In our case, we have not fixed as we have no debt.  However, when we did have a mortgage it was the basic variable and never bothered hunting for deals.  Main reason was that when we took out the loan we had a large deposit and we calculated the repayments as if we had bowwowed the entire purchase price.  Still in the same house.


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## 2020hindsight (13 January 2008)

so is 3 years the recommendation?
(I'm still on variable rate - must be financially illiterate in nc's eyes  )


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## tech/a (13 January 2008)

> Originally Posted by numbercruncher  View Post
> Pretty much thanks to the "system" average Australians are financially Illiterate, hence only 21pc of owner occupied mortgages being fixed .....
> 
> I think the "sheeple" take literally politicians pledges of keeping Interest rates low .....
> ...




*Cruncher!*

Hmm I don't know about that.
Have you actually looked into that or are you just taking a literate guess, making what you believe to be a logical assumption?

I think the latter is the case!

Got any stats even graphs to back your argument.
if so I'd love to see them.

Just to get this very clear in my and everyone's mind that fixing interest rates for 3 to 5 yr terms is so far superior to staying with variable rates that you'd have to be financially illiterate not to!


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## Smurf1976 (13 January 2008)

numbercruncher said:


> Bit of economic/political study should be compulsary while at high school.
> 
> It was becoming blatantly obvious about a year ago that we are entering a period of High Inflation and rising Interest rates.
> 
> Johnny can take the brunt of the blame imho



Can't argue with that. First thing I learnt about finance was in primary school grade 5. And that was only because the teacher knew the subject, understood it's importance and also knew full well that this was the only time any of us would be taught anything about it at school.

I actually remember him making that point quite firmly. Pay attention now because this won't be covered at high school. Then he proceeded to teach about interest rates, bank charges, compounding, bonds, shares etc.

I didn't recall the detail but it was damn useful since at least by the time I needed to know when I got my first job, I remembered enough to know what I needed to find out about in detail. That put me ahead of probably 99.9% at that stage.

No other class in the school did anything on finance to my knowledge. Neither did they do any of the science, environment, electronics and computer programming that we did. He even had us at the market running a stall on Saturday morning to teach about business. And yes, that was grade 5 in a public school. One of the few truly good and committed teachers IMO.

I had a wonder through the school grounds a couple of years ago. The nature "compound" that we built is still there but it's in ruins unfortunately. Looks essentially untouched since that time but it's just fallen down and grown over with weeds etc. Shame...


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## numbercruncher (13 January 2008)

Hello Tech,


Just to be clear Im not saying people who consciencely make the decision to be variable *or* fixed are financially illiterate or finacially superior.

Im saying the bulk of mortgages are variable because the bulk of people have absolutely no idea, they dont understand or indeed even think about concepts such as economic cycles, Inflationary enviroments, or banks out to rob them etc.

Most people simply dont do their own research, they listen to politicians on the Idiot box and take as gospel the pledge of low Inflation and low interest rates, they listen to the lenders like they are some sort of expert on which loan to choose (experts do 20 hour courses to reach expert status nowadays)

Im not implying anyone personally reading this thread is inferior for whatever choice in loan product they made, anyone using this forum im sure has a reasonble understanding and doesnt act on impulse or bad advice from "experts".

I know the benefit of hindsight is a great thing, but did anyone really think a year or two ago that Interest rates could possible go any lower considering the booming economy etc ?

I read a good piece of advice the other day " never bet against the Fed "

Now maybe the same can be applied to our RBA, they have a mandate (that I assume they will stick too) of keeping Inflation between 2 and 3pc, US and China imho are going to be exporting Inflation for some time. I think the only thing that will change the RBAs course is an economic crisis , which doesnt seem to be off the cards either.

Thanks 

ps. Sorry if my " Illiterate " comment has offended anyone, none intended.


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## numbercruncher (13 January 2008)

Number of fixed mortgages on the rise big time, over 50pc increase in two years according to this.




> Recent interest rate hikes, and the prospect of more to come, has seen the popularity of fixed rate mortgages take off, new figures suggest.
> 
> Data from financial research service Cannex showed that in November last year more than 28 per cent of all Australian mortgages had their interest rates locked in.
> 
> That was up from 27 per cent in October and about 17 per cent two years ago.




http://news.smh.com.au/fixed-mortgages-growing-in-popularity/20080111-1lfw.html


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## tech/a (13 January 2008)

Hey I agree most people are financially Illiterate.

The more literate I become the more illiterate I become.

But to Mortgage rates.

In fact staying variable over time has shown to be slightly better in terms interest paid than fixing loans,even by trying to time that fixing.

Have a look




Oh and for those who don't know the answer to which political side has the best results with interest rates have a look at this!

Maybe there is NO BETTER time than now than to fix interest rates for as long as you can!


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## numbercruncher (13 January 2008)

I see the exact opposite of what the pro Liberals see in that graph.

I see Labor Inheriting a rising Interest rate enviroment, then the Liberals inheriting a lowering one, and now back at square one.

And this new fandangled thing that everyone seems to love " Globalisation " will give them even less control than they thought they had. 

I still think timing is everything, but yes if your in for the long haul 20 year grind the mortgage then variable I concede looks better from a historical view.


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## Smurf1976 (13 January 2008)

Looks like the Liberal supporters haven't worked it out yet. That was the sort of nonsense that lost them the election...


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## theasxgorilla (13 January 2008)

numbercruncher said:


> I see the exact opposite of what the pro Liberals see in that graph.
> 
> I see Labor Inheriting a rising Interest rate enviroment, then the Liberals inheriting a lowering one, and now back at square one.
> 
> ...




I agree to an extent.  The trends were largely in place irrespective of the party in power.  What I would instead pose as a question is what came first: chicken or egg?  I think that combinations of economic conditions create a propensity for certain economic parties to be elected into power.

That the elections occur every 4 years and rates can be raised ever 2nd month by varying degrees means that correlation between the two is pretty futile.  If you could take interest rates from other western countries and super impose them over the top of Australia you would probably find very similar trends.  That says to me it can't be the political party, but rather that the other economic factors that determined the interest rates also determine that a particular party would be voted into power.


*BTW, globalisation ain't new anymore, it's been here for   a decade at least.  If you're not involved with it in someway then you're already behind.*

ASX.G


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## 2020hindsight (13 January 2008)

numbercruncher said:


> ps. Sorry if my " Illiterate " comment has offended anyone, none intended.



lol - no probs m8 - 
Personally I treat these things as yet another gamble. 

I usually go with the option that requires the least trips to the bank to change things over lol.
"financially lazy as well as illiterate" 

In the same way, as often as not, I sell just before dividend payment with shares - saves me having to bank the cheque lol.  And the shares inevitably go down by about the same value afterwards - sorta 
disclaimer - do not take this "advice" / comment as gospel.


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## numbercruncher (13 January 2008)

I think a decade is very new in the grand scheme of things, seems we are only just beginning to stress test the new system out 

Whats the old saying, Privatise the Profits , Socalise the losses , adjusted for Globalisation, could it be Socialise the losses across the entire Globe ??  or will they all of a sudden become Nationalistic when/if the perverbial Poo hits the fan ?

Time will tell!

We live in Interesting times ( i think )


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## numbercruncher (13 January 2008)

2020hindsight said:


> In the same way, as often as not, I sell just before dividend payment with shares - saves me having to bank the cheque lol.





LMAO I often do that to for the same reason, Long Live the Financially Lazy, woot!


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## 2020hindsight (14 January 2008)

:topic nc, - as for avoiding dividend cheques - I think in my case it's something to do with the fact that you get an e-copy of a certificate of a share trade, (which is difficult to lose) whereas you don't for a cheque  
SMSF, etc etc - audited etc etc


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## numbercruncher (14 January 2008)

Some more evidence of the consumer feeling the sqeeze .....




> Online home loan inquiries up 300%
> Monday Jan 14 09:59 AEDT
> Internet-based home loan provider Myrate.com.au says it has experienced a record increase in inquiries since the last of the major Australian banks raised interest rates last week.
> 
> Myrate.com.au, an internet mortgage lender funded by ING Bank (Australia) Ltd, said it recorded a 300 per cent increase in daily inquiry volumes in one week.




http://news.ninemsn.com.au/article.aspx?id=345255


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## nioka (14 January 2008)

Don't be tempted to look at borrowing in an overseas currency to lower your interest rate.When the interest rates in the 80's got to 20% a certain financial adviser ( who is still in business with a daily newspaper) convinced me to change my borrowing to swiss franks where the interest rate was less than 8%. The only problem was that the $350,000 I borrowed blew out to $990,000 in a matter of months with a fall in the Aussie dollar in "the recession we had to have". I attended a seminar with my bank manager we he showed us it was bullet proof, with fancy graphs to prove it.  You have been warned as the saying goes.

P.S.I fixed my home loan by selling property, paying all my debts and never trusting banks or financial advisers again.


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## numbercruncher (14 January 2008)

> Inflation data 'points to rates rise'
> 
> 
> Unofficial inflation data released today could put pressure on the Reserve Bank to increase interest rates at its board meeting next month.
> ...




http://www.abc.net.au/news/stories/2008/01/14/2137812.htm


Inflation running 20pc above the target maximum.

Seems they have absolutely no choice in Feb ! maybe they shouldnt muck around and just go .5pc.


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## Judd (15 January 2008)

We did not fix our loan.  Didn't see the need as we put up 46% as a deposit and paid the loan off as if we borrowed the 100%.  Mind you that was in 1988 when interest rates went to around 17%: completely different to today's environment.


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## bloggs_oz (15 January 2008)

When I initially got my loan 3 years go, I split it into half fixed and half variable.  The loan was through the commonwealth bank, and our fixed rate was 6.5%.  Wish I had've gotten a longer fixed period (but these decisions are always obvious in hindsighed)...

Now that our fixed period is expiring, I'm going to move to the lender with the lowest fixed rate and fees (which appears to be onedirect, owned by ANZ).  I'm going to split my loan again, and it looks like I'll be getting a 4 year fixed loan @ 7.94% - which I think is great in our current environment.


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