To fix or not to fix?????????????

[~mamaspice~]

In light of the impending announcement from the reserve bank tomorrow.

Who is sticking with variable and who is going to or has fixed their interest rate???

We are a first home buyer (well bought 6 months ago)and very unsure of what to do. If we fix now for 3 years we pay an extra $100 per week INTEREST on our mortgage. But have peace of mind knowing exactly what our repayments will be.
If we don't fix we have more money in our pockets and are not giving it away to the bank but if the variable goes up to 8% or beyond within the next 3 years we'll be struggling (especially seeing as I want another bub and don't intend to be working fulltime after #2 comes along)

what to do . . . what to do . . . .

[AnyDream]

Mara, I generally don't ever fix because the bank usually calculates the fixed interest rate so it still swings in their favour, long term. It also locks you into inflexible payments, no redraws, etc for the entire period. Make sure you check all the fees etc associate with breaking the fixed rate and think about how your circumstances might change during that time.

The exception I think I would make is if rates were getting really high (ie up near 9% mark) and there were signs of an economy blowout brewing like in the late 1980s. We are a *lot* of rate rises away from that right now.

[~mamaspice~]

very true Marydean! I just find it all so scary!
Another option I was thinking about was staying variable but making our repayment amounts the same as if it were fixed (ie paying $100 per week extra on top of our current variable amount) that way we'd wack more off our principal and if times got tight we would be ahead and could re-draw if absolutely necessary.

I'm just really hoping that if we did this our variable rate wouldn't go much over 7.5% within the next 3 years (ours is currently 5.39%)

These talks of 0.5% rises and 7 rises over the next 12 months just makes me nervous!

[kawazuki]

we fixed for security of knowing how much we have to pay, we like to budget and run on a tight budget so we can afford the extras, if we werent fixed yeh we could prob do it all today, but we find saving a better option for us.

we are fixed at 6.9% and are very happy ours runs out in 18 months and we are not sure what to do
but we do have huge fees to pay if we break out early etc

[Astrid]

I think there was an article today that said something about it being too late now to fix rates. Currently we pay more into our loan, we are safe to about 8% before we have to worry about finding extra.

[~mamaspice~]

When i first enquired with our mortgage broker about fixing about 3 weeks ago the fixed rate for 3 years was 6.99% on a fixed package. Which in my opinion isn't a bad rate.But when I enquired again today it's gone up to 7.39%. Gotta love banks!!!

[Lulu]

Nope, not fixing!

[Jaycee]

We're about to finalise our mortgage in the next few weeks and don't think we'll be fixing.
If we were to fix on the number of years we wanted (5 years) it's approx 2% higher than variable at the moment. As MD pointed out, you also can't have a redraw facility or an offset account (most banks anyway) and I figure the amount of interest that will be taken down due to having an offset account will outweigh the benefits of fixing.

[AnyDream]

Another option I was thinking about was staying variable but making our repayment amounts the same as if it were fixed (ie paying $100 per week extra on top of our current variable amount) that way we'd wack more off our principal and if times got tight we would be ahead and could re-draw if absolutely necessary.

Good thinking 99. Chop as much off your principal now while the interest rates are lower.

[entreat]

:yeahthat:

If you can pay more earlier - why wouldn't you?

Fixing the interest is making the bet - "For the given time, I bet that interest rates will rise above what I'm fixing" but the condition of the 'win' is that the variable rate has to be higher than your fixed rate long enough to make the $$ balance out.

Personally, I'd only fix if I was sure (as you can be ) the variable rate will get to be higher than your fixed rate sooner rather than later, otherwise you risk breaking-even, or worse.

(incidentally, we are variable)

[2CheekyMonkeys]

i'm confused as what to do also! we are kinda already pushing the limits of our weekly budget and its only gonna go up from here! i think fixing it at least means security in budgeting.

[helle]

We bought our place 2 years ago and fixed for 3 years at 7.28%. At the time interest rates were going up, and so by fixing we missed that spike which we were pretty stoked with.

When they came right back down we went back and looked into remorgtaging and it was going to cost us 6k, so we've left it. We only have 12 months at our fixed rate left... lets hope we don't get hit with a high variable! In the perfect world we'll get a smaller interest rate, fix at that, and keep paying at 7.28% - i did say the perfect world though

It's all a big gamble! Do what your comfy with, ask your lender LOADS of questions... even if you think they're stupid, ask them anyway.

GL! xx

[AngelPunks]

not fixing - it cost me $8k to break the fixing on mine when I had to get it changed from joint names to my name.

Shortly it will become an investment property again - so it isn't going to bother me too much if the rates get higher

[~mamaspice~]

thanks for your replies everyone.

DH and I talked about it last night and we've decided not to fix, but to pay the extra $100 per week like we have fixed. we've made the right decision.

Lets hope todays reserve bank anouncement is only a .25% rise . . .

[~Raven~]

I think we're better off leaving it variable because when it's fixed you aren't allowed to pay to much extra off the loan and if you want to sell/refinance/redraw you get slugged with high exit fees. I like knowing that I can have the flexibility to do it my way and not how the bank dictates