@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?
@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.
@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 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.
@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 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.
@nt4maximusd Our renewal is coming up at the end of February and it was between 5 year fixed @ 5.27% or 5 year variable @ 6.19% (Prime-1.01)
I found the lower cost to break and the small spread (0.93%) made variable make more sense for us. We can stomach the extra payments. We’ll see in a couple years if it was the better decision, no one knows for sure!
@nt4maximusd Nobody knows. Banks all seem to think that starting in June this year we see rate cuts start, with some of them "pricing in" 125bp cuts by 2025. If that were to come true then variable is going to win for sure, especially since many variables allow you to convert to fixed later. IE, you could get a variable now, pay more for 6 months, and if rates dropped you could pay less after a year vs fixed - and then if you feel that rates could stabilize or bounce up again, lock yourself into fixed at that point.
@anxiouslywaiting2 In this case, variable would barely win with the rates OP provided. Assuming it is a 125 bp cut by 2025, that would still go from 6% to 4.75%. If the lender drops the full 125 on variable rate. And if rates do actually come down 125. If they come down 100 in a year, its a loss. If they come down 25 in a year, its loss.
@imheretohelp Because of how quickly shit got out of hand in 2022 I would need variable to come back to 2% and stay there for 3 years in order to come out ahead of fixed. Never going to happen.
