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Yesterday I was informed that ASB will be lowering their serviceability testing level... no confirmation on the new testing level or other banks intentions but if one does it the others are likely to follow.
These testing levels have been a handbrake on many borrowers who have high levels of equity so this might see a rush of funding to those who want to invest but in the recent past have been unable to.
"When you secure a new mortgage, banks will often pop a chunk of cash into your account – usually between 0.1% and 0.7% of your loan’s value. This is known as mortgage cashback. You can do whatever you like with this cash but homeowners often spend it on purchase costs, renovations and other property expenses. "
Along with the new bank and lending of 1.5mil is the decision to fix or float.
I am erring on the side of floating until we get to at least 2% interest rates, Im sure this is not far away, just wondering what everyone else is up to with new lending.
Along with the new bank and lending of 1.5mil is the decision to fix or float.
I am erring on the side of floating until we get to at least 2% interest rates, Im sure this is not far away, just wondering what everyone else is up to with new lending.
FH
Do the math. I am fixing as soon as lending comes up for renewal (but waiting until the last day or two).
Math is simple. New 12M fixed rate of say 2.7% vs floating rate of... 4%? On a $1M loan if you float at 4% instead of fixing at 2.7% for 3 months you pay an extra $3,250 (1.3% x 4 months). In order to save more than that in the following 9 months you need the 12M rate to be 2.26% or lower. I personally dont see that happening. But I've made plenty of bad interest rate calls before.
Do the math. I am fixing as soon as lending comes up for renewal (but waiting until the last day or two).
Math is simple. New 12M fixed rate of say 2.7% vs floating rate of... 4%? On a $1M loan if you float at 4% instead of fixing at 2.7% for 3 months you pay an extra $3,250 (1.3% x 4 months). In order to save more than that in the following 9 months you need the 12M rate to be 2.26% or lower. I personally dont see that happening. But I've made plenty of bad interest rate calls before.
Thanks, yes the math tells the real story, what if going to a 6month rate was an option? I will look at this on interest website.
Thanks, yes the math tells the real story, what if going to a 6month rate was an option? I will look at this on interest website.
Best to do the calculations. But in the end you have no idea what rates will do. Always a chance of a shock and they go up. Not a high chance, but not impossible. I know people locking in 3 and 5 year rates now, for certainty.
Fact is, rates are lower now than anyone has ever seen before. Would you really be upset to be borrowing $1.5M at 2.7% if in 6 months the rates are 2.1%?
Maybe split it into two or three different terms to hedge your bets.
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