Interest rates are the lowest they have been since World War II, and there is no sign of them slowing.

What does this mean for you?
Well, its great news for those entering into new home loans or those coming to the end of their fixed term. Perfect timing to jump onto those low rates and snag yourself a great mortgage repayment situation. However, the lower rates aren’t great for those of us with home loans in fixed term contracts, with some time to go. If the latter situation is you, then keep reading.

A few years ago, rates were around 5-6% and those with loan terms finishing up, were rushing to fix again at these fantastic low rates. Fast forward to now, a few years on, and some banks are offering less than 4% interest rates, making those rates from a little while back not quite so rosey.

Many of us wanted long term certainty with our mortgage payments, and while, we’ve certainly given ourselves that by fixing, we are now locked in our contracts with a few years to go, and missing the potential for even more savings with these record breaking interest rates on offer.

So, if you are still in a fixed term contract, what now?
You may be considering how or if you should break your current fixed term, but is it worth paying that hefty break fee with your bank? Maybe, maybe not.
How do we know the rates won’t just drop again? We don’t.
But it’s a great time to get thinking and do a review on your current mortgage situation.

Breaking your term and fixing with your bank
While some banks may let you break a fixed term to secure a cheaper rate with them, most banks and lenders will charge a break fee and this fee depends on a number of factors. It varies from lender to lender, and it depends entirely on how much you have left in your fixed term, how much the bank will lose from you by you breaking your contract, and what the lender might be able to lend the money to a new borrower for.

Breaking your term and changing to a new bank
Perhaps you’re considering a shift to a new bank, and this is an option.
But buyer beware, in this situation a break fee will most definitely be charged, but you may be able to negotiate a “cash back” deal with the new bank to help cover some of the break fee with the old bank.
Get in touch with us to discuss your options.

Sounds like a lot of hassle and is it really worth it?
Let’s give you a quick scenario:

Your current mortgage is $500,000.
You’ve fixed for 2.5yrs at 6.5% (over a 25yr term)
Your interest for one year is $32,500

Your bank is now offering 4.7% to fix for 2.5yrs.
Your interest for one year at this rate would be $23,500

That’s $9,000 of potential savings in the first year.
BUT to break your mortgage, you’re looking at a $5,000 break fee.

So, that’s $9,000 worth of savings vs. a $5,000 break fee. That still equals $4,000 of potential savings.

In this case, it’s worth the leap!

While this situation works out great for the home owner, it’s not always the case.
Talk to our team, and we will help assess your situation first and weigh up your options.


Give us a call 020 438 5626