What's Happening with Interest Rates
You may have read in the press recently that banks are competitive and are offering discounted interest rates. While this is true, this is really nothing new, banks are always looking for ways to keep your business and gain new clients.
If you are currently on a fixed rate, in our opinion there is usually very little value in asking your lender to break your fixed contract and switch you to a lower rate, because they’ll simply ask you to pay the interest on the rest of your fixed contract in advance before switching you to the lower rate, however there are exceptions so if this is something you'd like to explore then please let us know.
If you are on a floating rate you may like to consider whether now is the right time to switch to a fixed rate, but it depends on your strategy, in other words, reviewing why you are on a floating rate currently (see fixed v floating section below).
In either case, the actual interest rate you are currently paying should be a relatively small part of your overall borrowing strategy. For example if you have a $200,000 mortgage and your interest rate drops from 6% to 5.5% this will save you approx $756 per annum or approx $15,120 over 20 years but if you remained on 6% and increased your repayments by $53 per week this would reduce the term of the mortgage by 10 years and result in additional principal repayments of $55,000 over the same period.
Unfortunately the media have jumped on this issue and arguably given it more attention than it deserves. However at least it's providing a trigger for people to think about their mortgage and this is a good thing. If it is causing you to think about your mortgage and you want to review your strategy or help with making some changes, give us a call to discuss.
Fixed or Floating
Why choose a Fixed Rate?
Fixing your mortgage means you’ll know exactly what your repayments are for a particular length of time and you can budget accordingly
Why choose a Floating Rate?
Having your home loan on a floating rate you have maximum flexibility, enabling you to increase your repayments or make lump-sum repayments at any time without penalty.
How do our interest rates compare with Australia and USA?
ANZ and National Bank: 1 year fixed 5.25%, Variable 5.74%
Westpac: 1 year Fixed 5.25%, Variable 6.24%, Choices Everyday 5.60%
ASB: 1 year Fixed 5.25%, Variable 5.75%
Commonwealth Bank of Australia: 1 year Fixed 6.14%, Variable 7.01%
NAB Australia: 1 year Fixed 5.89%, base Variable 6.49%
Barclays: 2 year Fixed 3.79%, 2 year Tracker 3.29%
HSBC: 2 year Fixed standard 4.99%, Lifetime Tracker Standard 4.99%
Wells Fargo: 15 year Fixed 3%, 5 year adjusted Rate 2.25%
Chase: 15 year Fixed 3%, 5 year adjusted Rate 2.375%
*All rates are current as at 15th May 2012