refix

Fixed vs Floating

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Now is a great time to be refixing a home loan. As long as you have sufficient equity in your property it is very likely you will be fixing a home loan for a rate under four per cent.

The official cash rate has just reduced to an all-time low of 1.5%. This will mean some downward pressure on rates. However, it is likely the markets have priced some of this in already. At the time of writing, there has been no movement in terms of home loan rates, however, we wait with some anticipation.

 

The only upward pressure on rates seems to be the Reserve Bank consultation to increase the capital that banks are required to hold. If/when this gets agreed to, it will affect the profitability of banks and, therefore, is likely to see some upward pressure on rates. However, this seems like the only force capable of driving rates north right now.

 

On a related note, when an adviser from Velocity sits down and reviews a client’s home loan structure, it is very rare that there isn't some 'tweak' we can make to improve that client’s situation. Sometimes a major overhaul is required and, with interest rates this low, overhauls are common.

 

I hope that before your fixed rate rolls off, we will be in contact. However, our system isn't (quite) foolproof, so if we do miss you, please don't hesitate to make contact and we will chat through options over the phone or arrange a quick review meeting.

 

Brendon Ojala is a Registered Financial Adviser with Velocity Financial. No investment decision should be taken based on the information in this blog alone. A disclosure statement is available free of charge upon request.

 

 


When it comes time to re-fix: The dos and don'ts

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When you get that email from the bank saying your home loan is due to for re-fixing, do you A) just hit the “yes” button, or B) take the opportunity to reassess in order to strike the best deal?

Re-fixing provides an excellent reason for reassessing where your personal finances are at, taking in the changes in the banking industry and adjusting your plan and home loan structure to suit.

 

So, here are some quick pointers to keep in mind for when you get that re-fix email:

 

Do … see the re-fix email as a chance to reassess your financial situation and survey the financial landscape.

 

Don't … just hit the button on the banks’ email or internet banking message without talking to a trusted financial adviser (of which, we can help!).

 

Do … use the automated calculators the banks provide—they’re very useful tools and help to make things simple. But they do have their limitations …

 

Don’t … just rely on these calculators as they often miss the individual nuances of people’s hugely varied financial and life situations. After working with literally 100s of home owners over the years, we know that everyone can benefit from a tailored and personalised strategy. There may come a day when technology can handle all these nuances, but until then we are here to help.

 

Do … get someone else to do the donkey work. Re-fixing at the click of a button is obviously less stress than researching the market and negotiating afresh with the bank, but the good news is that you don’t have to do that donkey work—we do it for you! 

 

So, the message from us ...  give us a bell before click the “yes” button on re-fixing. Let’s get you locked in to your best possible mortgage.

 

Brendon Ojala is a Registered Financial Adviser with Velocity Financial. No investment decision should be taken based on the information in this blog alone. A disclosure statement is available free of charge upon request.

 

 

Fixed vs Floating: Feeling lucky?

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Brendon reveals the current best rates on the market and suggests that now might be a good time to bet on interest rates staying low.

Assuming you have at least 20 per cent equity and an average-sized loan on an owner-occupied property (note that these things matter when it comes to what interest rate you will be offered) the following are good rates right now:

 

·      1-year fixed rate is 4.3%

·      2-year fixed rate is 4.6%

·      3-year rate is around 5.0%

·      5-year rate is around 5.5%

·      A good floating rate is discounted to around 5.20%.

 

The amount of cash you can expect to receive from the bank as an incentive will vary anywhere from zero to almost one per cent of the loan amount.

We have seen a few drops in interest rates over the last week or so. Lenders are definitely starting to sharpen their pencils on their two-year fixed periods, as well as some of the longer term rates. And we are starting to see some good discounting on particularly strong deals. It looks like banks may be gearing up for their “spring sales”—if there is such a thing in the banking world.

So, what would I do if I was fixing my mortgages right now? 

If I felt like taking a bit of a gamble, I may fix for one year and roll it over year-on-year. I would win this gamble if rates don’t go up too fast over the next few years, as the 1-year rate is the cheapest on the market. To back up this approach, of late, there have been hints that things aren’t going anywhere fast, both locally and internationally, so perhaps it’s not a bad bet.

If, however, I get that wrong, and my budget won’t deal with large potential increases in mortgage costs over the next few years, I would fix for two or even three years and be willing to pay a little more now for that certainty. I would definitely keep some of my loan floating (in lines of credit or offset accounts) to allow me to pay extra down and have the flexibility of re-drawing these funds should I need to.

Additionally, banks are making it increasingly easy to re-fix on line. However, the downside of this is that there is no advice being offered during the re-fixing process.  So if you want some advice around what to do with a home loan that is rolling off a fixed rate, do get in contact with your friendly Velocity adviser.

Brendon Ojala is a Registered Financial Adviser with Velocity Financial. No investment decision should be taken based on the information in this blog alone. A disclosure statement is available free of charge upon request.

How "faster" and "easier" can cost you thousands

Twenty-first century banking has arrived, but amidst its speed and efficiency there’s a trap waiting for unsuspecting banking customers.  

 

Here’s my observation: Banks are increasingly trying to make things faster and easier, particularly when it comes to re-fixing your loan or signing up for new products. This of course is awesome if you want to make things fast and easy. It is also a technology-led tsunami that simply won't stop.

 

But here is a question to throw a spanner in the works: Where is the advice?

 

The problem with "Click here to lock in a two-year rate at x.xx per cent ... oh, and if you do it now you can get free fries with that" is that a two-year rate may not be best for you. If rates have dropped should you keep the payments the same?  Have your circumstances changed in the past two years? What are your plans for the next two years? Moving? Kids? New business? The answers to these questions all determine if clicking that button is good for you.

 

Getting good advice can make a huge difference.

 

I had some clients recently who were about to "click the button" when we intervened just in time. They were about to fix for two years, however, their income had doubled since they took out their loan and they had been given $20,000 in an inheritance that was sitting in a savings account.

 

With some quick intervention in their home loan structure they managed to half the length of their mortgage and saved them over $250k in interest over the life of their loan. And it wasn't a big, drawn-out process either.

 

Banks are awesome when they give us money to buy houses and when we need credit cards. However, as consumers, I think we all need to be taking advice before making significant financial decisions.

 

As mortgage (and insurance) advisers our job is to work alongside the banks and give that advice and make recommendations to our clients based on their situation.

 

Before you "click that button" give us a ring.

 

Brendon Ojala is a Registered Financial Adviser with Velocity Financial. No investment decision should be taken based on the information in this blog alone. A disclosure statement is available free of charge upon request.