I have a mortgage of $300K at a fixed rate of 4.99% finishing up in November this year.
The plan for me has always been to sell this property in 2017, so I would be looking to refix for 3 years. With the OCR projected to rise 0.25 every quarter, I am assuming banks current fixed rates will also continue to increase and would be looking at ~6.5% rate for 3 year fixed in November. I have been offered a rate by my bank to break my current 4.99% and refix again at 5.95% at no cost.
By my crude calculations, assuming that rates in November are 6.5%, I would save myself around ~$4-5K interest over the life of the loan by refixing at the 5.95% rate now. However, if rates stay the same, then I would have thrown away around $2K by breaking my current rate.
On a side note, one thing I don't get about the current rates, is they are suppose to factor in known market information, so if the banks "know" that the RB is more than likely going to raise the OCR by 0.5% then surely their 3 year fixed rate should already accommodate this?
Anyway, should I take the 5.95% rate now and have piece of mind or should I play the wait and see game?
The plan for me has always been to sell this property in 2017, so I would be looking to refix for 3 years. With the OCR projected to rise 0.25 every quarter, I am assuming banks current fixed rates will also continue to increase and would be looking at ~6.5% rate for 3 year fixed in November. I have been offered a rate by my bank to break my current 4.99% and refix again at 5.95% at no cost.
By my crude calculations, assuming that rates in November are 6.5%, I would save myself around ~$4-5K interest over the life of the loan by refixing at the 5.95% rate now. However, if rates stay the same, then I would have thrown away around $2K by breaking my current rate.
On a side note, one thing I don't get about the current rates, is they are suppose to factor in known market information, so if the banks "know" that the RB is more than likely going to raise the OCR by 0.5% then surely their 3 year fixed rate should already accommodate this?
Anyway, should I take the 5.95% rate now and have piece of mind or should I play the wait and see game?
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