5% fixed v 6% variable

[toviah]

@leodrone Keep in mind that the variable 3 months interest charge is higher than it used to be

 

[brotherjonathon1456]

@toviah Well yeah, since the the rates have gone up and the 3 month's interest is based on the rate you are paying, not soek other mythical number. Kind of an obvious statement, don't you think?

Water is wet too.

 

[toviah]

@brotherjonathon1456 I suppose it is. Maybe I should’ve mentioned or asked if the gap/difference between variable and fixed penalties has narrowed since rates have climbed. Been a while since I’ve looked at the calculation for IRD for fixed mortgages.

 

[brotherjonathon1456]

@toviah Also, the variable penalty will almost always be cheaper than the fixed rate mortgage breakage penalty. The exception being when you within 3 months of your renewal in a fixed term situation.

 

[leafis]

@leodrone Ah okay, thanks.

So are people with fixed mortgages less likely to want to sell cause they have to consider the penalty?

 

[manifestmktg]

@leafis With all my fixed mortgages, you were allowed to sell and start a new mortgage within 6 months penalty free.

 

[leodrone]

@leafis Generally yes, that is one factor to consider when selling. There are other factors (maybe your needs change, maybe you need more space because of a growing family, maybe you're downsizing, whatever) but a big penalty will impact the decision to sell.

If someone is thinking of selling, one of the first things to do is call your lender and ask for a current penalty quote. The exact figure can change but it will give a ballpark to work with.

 

[flairy]

@leafis My variable is like that. At any time I can call up the bank and switch it to a fixed rate mortgage.

 

[pearlinprogress]

@nt4maximusd What about a shorter term fixed? Can you get a 3 year at a decent rate? 1 year?

 

[scottyp588]

@pearlinprogress Shorter ones are more expensive right now, unless you get a really sweetheart deal. Bonds are still inverted. - 1 years are priced as if two cuts have already occurred, 5 years as if seven cuts have happened. It's unlikely you'll get much cheaper than current 5 years since they're already at terminal prices.

They've also jumped 30bp in the last few days so if you have a rate hold, hang onto it.

 

[pearlinprogress]

@scottyp588 Not really suggesting it is cheaper over the 1 year time frame. Was thinking it would allow for renewal in a year at a lower rate…

 

[scottyp588]

@pearlinprogress I don't think you will find cheaper fixed rates in a year - three rate cuts still leaves 5-years 75bp inverted versus overnights in a years time, they would have to rise to close the gap.