Mortgage

[erick (Eric)]

I've been fixed rate on a big mortgage since Sep 2004 - 7.35%. I had a big smile through 2006, 2007 and most of 2008.

"Westpac announced it is passing on the full one percentage point cut on its standard home loan rate. Its home loan rate now stands at 5.91 per cent."

Not smiling now.

No problem, I come off fixed in Sep this year.

It'll be interesting to see who won by the end, the bank, or me

[TrevorW]

I bet you lost that spelling contest too !!

[Glenhuon (Bill)]

Sorry Eric, banks never lose
If things go pear shaped they get some silly polly to bale them out, (with our money).

Bill

[Starkler (Geoff)]

You did take the opportunity to pay down the principal while you were in front didnt you?

[PCH (Paul)]

Hi Erick,

more than likely you I'm sorry to say.

In an article I read recently, it explained that because of the extra margin that a bank has to include in the percentage rate of it's fixed loans, and the way that over time variable rates fluctuated - perhaps quite dramatically - the banks win over 80% of the time and the poor punters win only about 15 to 17% of the time.

So the message was clear, you'll likely be much better off by going with the variable rate. That said, I know of more than one person who, like yourself Erick, had a great big smile throught the better times. Perhaps you'll be one of the 15 to 17%

Cheers,

[OneOfOne (Trevor)]

We are probably showing our age, but I am sure back when interest rates approached 20%, many people would have loved to have been locked at that rate! I shudder to think how people these days would cope with interest that high again...I remember paying almost 19% at one time

[Ford Prefect (James)]

The banks have some of the best information in the world on where interest rates will be going in the future, very highly paid econometricians and proprietary software.

Banks wouldn't offer fixed rate loans if they weren't coming out in front on the deal

Individuals may periodically do better than if they were on a variable rate if they're lucky, my parents were on 8% fixed from '72-mid90s when they paid it off. However, the bank already has it worked out that they balance fixed rate loans against the interest rates they're paying to depositors, so they're making a defined profit regardless. On average, fixed rate loans are a money maker.

I'm an economist, and I don't go for them - variable all the way!

[toryglen-boy (Duncan)]

Originally Posted by TrevorW

I bet you lost that spelling contest too !!

LOL

thats why i opened the thread!! i thought "oooooo!!! whats a morgage?"





just messing with ya Erick

[erick (Eric)]

Spelinge? Whatt's dat? I'll have you know I had a good Queensland school education.

Paul and James, My real reason for fixing the interest rate was that I had to be sure what my repayments would be for several years. A few percent up (which did happen) was going to be difficult territory! If I save money or break even over the five years, that's cream on the cake.

Geoff, on a fixed interest, I was limited by bank rules in how much I could get in advance. But I have got enough ahead to make it reasonable to convert to a variable rate mortgage with redraw.

Trevor, yep, my first mortgage peaked at 18.5% around 1990/91 when I could least afford it. I recall paying the max I could each month, but at the end of each month I owed the bank $300 more than at the start of the month. Groan! Well it has ticked down now to where I can use it as a source of cheap credit through redraw.