My financial institution has been in touch to notify me that the fixed half of my home loan will soon expire (the other half is variable) and that I have the choice of reverting to their variable rate of 5.26% (comparison rate) or extend for a further 36 months @ 4.29% (comparison). They also offer 1 year fixed - 4.34%; 2 yrs - 4.31%; and 5 years - 4.54%. What do you advise?
I would advise that you speak to a trusted broker who will discuss your current and future needs and recommend a few options for you.
There are definitely better fixed rates and better variable rates available from a wide range of lenders
I would suggest that you move quickly as the process can take upwards of 45 days if you change lenders
Going to see a finance broker who is accredited to various lenders (not just a few) will be able to present more available options to you. You'll find that your own bank doesn't necessarily have the most competitive offer for you if that is what you're after. This is the #1 reason more borrowers are switching from their banks to brokers.
Before deciding on which rate is best for you, I would suggest deciding which loan is most suited to your short and long term plans. A fixed loan may not be suited if you plan on using your current property for other investments and other purposes. Best to discuss your plans with a finance broker and they will give you the best advice so you don't pay unnecessary fees down the track.
Happy to assist if you required.
All the best,
It's an important and timely question as a number of lenders have been making some subtle changes (increases) to their interest rates and there is continued speculation of further rate rises outside decisions made by the RBA.
Firstly I will say the rates you’ve been offered are high in today’s environment. As a guide, the variable component of your home loan should start with a 3 or at least be in the low 4s. It may well pay to test the market by:
1. Having a look at the financial comparison websites like www.ratecity.com.au and www.mozo.com.au to see what other lenders are offering in terms of variable rates and fixed rate options
2. You can then contact your current lender and let them know you have been researching the market and have found some very competitive options. Given them an opportunity to review your rates and see what they are prepared to offer in order to keep your business. I’d be quite surprised if they didn’t sharpen their pencil.
3. You can also contact a reputable mortgage broker and let them come back to you with a minimum of three options of other lenders rates and products. If you did decide to refinance it is important to note there is no guarantee the new lender would not look to increase their own rates so you need to be very comfortable the new lenders is offering you considerable savings over what your existing lender would hopefully offer when they sharpen their pencil.
If you are looking at a fixed rate option the 2-3 year option will at least give you some clarity and comfort within your own financial position in the short term. I would, however, recommend a part variable and part fixed option as it will help you pay off the home loan as quickly as possible.
Best of luck, I hope this helps
I would advise shopping around before making a decision. Most brokers have access to 30+ lenders and the rates you quoted seem a bit high compared to some I've recently secured for my clients. You could save quite a bit of money if you're not romantic about staying with your current lender. Hope this helps :)