I have been offered 4.09% fixed for 3 years and the variable rate is 3.69% for a split loan. The 5 year rate would be 4.29%. Would it be better to go for 3 or 5 years?
I doubt you are going to get someone to give a clear yes or no on this, because there are too many things that will affect you differently than anyone else, so ultimately the only person who can make that decision is you.......but you are doing the right thing in getting some opinions on what to do. Im sure that there are plenty of planning types on this platform who will be able to offer you advice on rates, and OTHER factors you probably should consider as well......because the RATE is not the only thing you need to look at.
Remember, the banks offer fixed rates to give you certainty of your repayments. Not so you can win the interest rate game. The bank will always win the interest rate game if you try to play fixed Vs variable too much.
On the variable loan you'll pay less interest initially (a saving). Assuming rates go up over the next few years you'll likely need the variable rate to go to something like 4.7% or above to be worse off over the 3 year period. In the beginning of the three year period you'll be paying less, towards the end maybe more (than the fixed rate) to end up in a similar position at the end.
Do you think (I don't) rates will go up by 1% plus over the next three years?
As the two gentlemen have suggested there is no way of answering this without a crystal ball and some Tarot Cards. Seriously though, this is a very personal decision that should be made after considering all of your current and future income and expenses and your life stages.
Fixed rates can be great for your peace of mind.
If you are in a position to pay down your loan aggressively, I would possibly stay variable. If you only pay the minimum then fixing may be a good option - only choose the 5 years if you are very confident that you don’t expect changes in your employment or moving house etc in that time.
Best of luck
It all gets down to your short term and long term strategy. What you want to get out of it is really important, rather than just comparing on interest basis.
Just looking at interest rates only gives you half a picture. Look for an adviser who can hear you out, give you recommendations based no your personal financial situation.
Fixing rates has its pros and cons that you need to be made aware of. Interest rate is only a tiny part of your decision making.
I have had customers asking me purely for interest rates, and after our discussion have come out of more detailed understanding of what is good for your individual scenario.