[BookishOne]

Just wondering whether people think that this would be a good time to fix our home loan rate - or if it would be a bit premature.

We have a large-ish loan (more than I would like anyway!) and have negotiated our current rate of 5.61% with one of the big 4 banks. We are happy to stay with them and have no interest in re-financing. They are offering a fixed rate of 4.99% for two years, with the option to fix all or part of the loan.

My thinking is that 4.99% seems a really good deal and I can't see rates falling that low, and remaining that low for long. I calculated the difference over the two year period to be around $5000 if we remained at 5.61% compared to if we fixed (obviously I realise that rates are likely to move in the two year period so this is not entirely accurate, it was just to get an idea).

I would fix most of the loan, and leave a small amount variable (say 30,000) so that we could keep our offset account against this, as well as funneling any extra repayments, as well as the savings we make from fixing the rest of the loan, into the variable portion. This way we would not be in any danger of paying anything over the 'allowable' amount of extra repayments into the fixed portion of the loan.

WDYT - Smart move? Or do you think the variable rate is likely to drop even further?

[LittleMissPink]

From what my broker told me, if they are fixing that low, then the bank expect their variable rates to go lower at some point in that 2 years.

[relz28]

Im just about to call the bank and lock mine in tomorrow! Im at 5.6% at the moment and I think 4.99 is great and im thinking if they fall past that (which I doubt) then 2 yrs isn't long at all.

[BookishOne]

Thanks for your replies!

Relz28 - that is what I am thinking, yest it is a risk, but it is only for 2 years so it wouldn't be the end of the world if the rates dropped that low (which I also doubt will happen...)

[Therese]

I think I would do it.

[Madnesscraves]

I was considering this too, but I am also of the opinion if banks are offering low interest rates they do think it will fall below that.

Believe me, it's so tempting to fix my rates on that too for 2 years. I wouldn't mind some extra $$ back in my pockets. I would be saving a decent amount per month and it would be nice to have some luxuries back.

I'm really hoping that the variable does go lower, though, I am worried that banks are going to start refusing to lower the variables and only lower on fixed to encourage people to go fixed in the long term for their (banks) benefit.

[AllyK81]

Finance is not my forte, but my husband is a financial analyst. His view is and has always been not to lock in rates.

He says they lock you in and almost always will offer something lower and reasons that why would they let you lock it in if they didn't think it was in their best interests?

[PrincessPeach]

I wouldn't be locking it in at that rate just yet.

As one of the financial guru's said, the time to lock in the rates is the moment when the fixed rate has just crept above the variable rate.

Also I have recently seen commercial loan rates at 4.5% fixed, so the banks are projecting a massive cut in interest rates over the next few years. Commercial loans are normally higher than a home loan.

[SummerStar]

I personally would do it at that rate. We are about to fix ours at a bit higher rate. Our reasoning is that we want to know how much we will be paying as a set amount for the next 2 years because our situation is changing slightly.
So for us that option suits just for the next two years.

[MrsLexiK]

We're thinking of doing it because we like the security whilst I am on mat leave which will be for 1 yr but I most probably will then quit and start studying and/or working part time. My thoughts is the banks won't drop the variable that much more but will probably move on the fixed a bit.