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Fixed rates expose borrower 'vulnerability'

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Australian Broker | 25 Feb 2013, 07:15 AM Agree 0
Borrowers who opt for three-year fixed rate home loans have a paltry 30% chance of saving money, according to data compiled over 20 years
  • QLD BROKER | 25 Feb 2013, 10:11 AM Agree 0
    Does it not make a difference "when" you fix. Yes clients who fixed on 7% or above during that time may have paid more - but with rates at 5.19% 3 years - historically these are pretty good and close to bottom of where they may go don't you think? Horses for courses - each client is different - but for me Fixed rates right now are pretty appealing over 3 years.
  • Justin | 25 Feb 2013, 11:42 AM Agree 0
    Agree QLD Broker. And surely knowing what your repayments are for a fixed period is worth something. I just fixed 2/3rds of my loan at 5.29% for 3 years and don't care if it goes down further, at least I know I can comfortably pay extra.
  • NoTimeLikeTheFuture | 25 Feb 2013, 12:02 PM Agree 0
    This confirms what I suspect i.e. banks know more than consumers - and they price fixed rates accordingly.

    I think we're best off fixing for emotional / security reasons and not to make money, as we can't expect to know more than the banks.

    If servicing is strong then variable probably leads to the best outcome (as this study indicates) - and variable loan has offset to boot.
  • Andrew Hetherington, Intellitrain P/L | 25 Feb 2013, 12:05 PM Agree 0
    I would think a 30% chance is a lot more than "paltry". People buy all sorts of insurance with a lot lower chance of claim that that (not to mention lotto tickets). It is not just the chance of it occurring that is relevant, but the impact to the individual if it does.
  • Kevymac | 25 Feb 2013, 12:43 PM Agree 0
    People dont fix to beat the variable, they do it for peace of mind. We are in a period where fixed are lower than variable loans in many cases, which historically is not the case in Var/Fixed conversations. Im not a gambling man, Fixed for 3 years at these rates, I'll be taking them up and so will my investors.
  • Marios Rokka | 05 Mar 2013, 04:50 PM Agree 0
    Interesting Article, given that during that period, there were few opportunities to fix with rates as much as 70 basis points lower than variable. Given that current fixed rates are seen as being at the bottom of the cycle as they were in previous years before variable rates bumped up, taking the rate offers Security (as mentioned by Kevymac) and value.
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