Finance advice
Philippe Brach

Thinking of fixing your mortgage rates?

By Philippe Brach

Consider these three questions before making the decision to switch to fixed interest rates.

Blogger: Philippe Brach, CEO, Multifocus Properties and Finance

Many of our clients have contacted us in the last few weeks to enquire about fixing their mortgage interest rates.

After a number of major banks began lifting their interest rates for investors, and then raised them again for all home loan customers, this is hardly surprising. No one likes paying more for anything than they have to, least of all their mortgage.

But before you rush into a fixed-rate loan, there are a few questions you need to ask yourself first:

1. What is my motivation for fixing my interest rates?

Are you keen to fix in order to ‘beat the market’ and save money, by locking in a lower fixed rate than the variable is likely to become?

If so, you’re probably setting yourself up for failure.

You see, banks don’t offer a five-year fixed rate of 5 per cent to customers if they expect they’ll be able to charge 8 per cent for the exact same loan in half a decade. They set their fixed-rate terms based on a number of factors but, ultimately, they’re in the business of making money. They’ll only offer a product or rate if the information they have at their disposal tells them it’s a profitable risk.

If your motivation is rate certainty, however, that’s a different story. Being able to lock in an affordable mortgage rate for a set period of time is the ideal reason to fix your interest rates, because it means your objective is being met – consistency of repayments – and any long-term rate savings are considered a secondary benefit.

2. Is there any chance I will want/need to sell my property or access equity during the fixed loan period?

Investors who foresee that they may need flexibility during the expected rate-lock period should think long and hard before fixing their rates. It is possible to break your fixed loan commitment, but there can be substantial financial penalties for doing so.

If flexibility isn’t as important, then fixing could be the right way to go. We recently helped a client switch from one of the ‘big four’ banks to a smaller lender; she was paying 4.87 per cent and is now paying just 4.29 per cent, fixed for three years and as part of the refinance, she accessed $50,000 in equity to purchase another investment property.

While she is saving money on this deal, her primary motivation for fixing was to unlock equity in the refinance process and to ensure repayment certainty over the next three years. During this period she has no plans to buy, sell or change her property position, as she and her husband plan on starting their family. This is the epitome of a strong fixed rate strategy as it suits the client in terms of their life-stage, financial position and goals – a win-win-win!

3. If interest rates fall further, what will fixing my rates cost me?

When you fix your mortgage interest rates, at some point during the fixed-term period, there’s a good chance the variable rate will drop lower than the rate you have locked in.

Many borrowers become stressed when this happens but it’s really just part of the ‘gamble’ of rate-fixing. Call it Murphy’s Law, call it the reality of mortgages – whatever it is, it’s the way it plays out for most borrowers.

I concentrated on the fact that I had enjoyed a fair, competitive rate on my mortgage/s, which had allowed me to carefully plan my finances and strategically structure my property portfolio. I’m in this for the long haul and when you adopt a ‘bigger picture’ view, paying a little more or a little less on your mortgage for a year or two isn’t a big deal.

Still not sure which way to go?

Are you still not sure whether fixing your loan (or perhaps part of it) is the right move? You don’t need to make this decision on your own; turn to your trusted team of advisers and property professionals for guidance.

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About the Blogger

Philippe Brach

Philippe Brach

Multifocus Properties & Finance was established in 2005 with the aim of mentoring investors to create wealth and invest in their future by building an investment property portfolio.

The company is led by Philippe Brach who has over 25 years experience in the international corporate world specializing in finance, accounting and investment. He is a fully qualified and extremely experienced real estate agent, concentrating his attention solely on investment opportunities around Australia. In addition he is a highly regarded mortgage broker, being accredited with around 35 different lenders.

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  ["title"]=>
  string(72) "Mortgages in a tighter lending economy and why Brisbane is a good option"
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Tune in to the latest episode of Property Showcase, the podcast with the inside track on the products and businesses that will help turbocharge your portfolio, maximise returns and make your overall investment experience seamless and stress-free!

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To hear more about these services, make sure to tune in to this episode of Property Showcase!

 Make sure you never miss an episode by subscribing to us now on iTunes!

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Son Pham is the accredited Head of Mortgages at Rethink Financing\/Rethink Investing. He has over 6 years\u2019 experience writing loans, over 12 years in the wealth management industry working for the likes of CBA, AMP and private practice and he is also a licenced financial planner (AFSL 326450). He has multiple investment properties that are cash flow positive which help pay his mortgage on his home and fund his lifestyle.<\/p>\r\n

Son is able to write all types of residential and commercial property loans.<\/p>\r\n

In this episode of Property Showcase, head of mortgages at Rethink investing Son Pham joins host Tim Neary to unpack how an investor should approach getting a mortgage in place with banks tightening down on serviceability.<\/p>\r\n

Hear from\u00a0Son\u00a0about:\u00a0<\/p>\r\n

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  • The pitfalls that he has seen people get into<\/li>\r\n
  • Interest only loans and if that is the way to go<\/li>\r\n
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    Whether it\u2019s building a successful property portfolio or investing in one of their Development Funds, Open Corp can help you through every stage of your investment journey. The team has 40 property specialists who collectively have been involved in over $4 billion worth of property transactions and the acquisition of more than 8000 homes and investment properties.<\/p>\r\n

    In this episode of Property Showcase, director of investment services for Open Corp Michael Beresford,\u00a0joins\u00a0editor of Real Estate, Tim Neary to share why he disagrees that the cooling market means that the best times are behind us.<\/p>\r\n

    In this episode, hear from\u00a0Michael\u00a0about:\u00a0<\/p>\r\n

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    • Why Brisbane is a good investment option right now<\/li>\r\n
    • How he wants to help clients take advantage of the current market<\/li>\r\n
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Mortgages in a tighter lending economy and why Brisbane is a good option
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Will Magee has had ambitions to enter into the Australian property market for quite some time, but it has been more than just finances holding him back.  Having been granted permanent residency just two weeks ago, Will is wasting no time and is now in the process of signing papers and finding his first investment property.

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In this episode of the Smart Property Investment Show, Will joins host Phil Tarrant to share why he is purchasing his first property in partnership with his brother, discuss the complications that can arise from such a strategy, and unpack the ongoing plan for building a joint property portfolio with his brother.

Will will also share how they approached saving for their first property, why he is taking out the mortgage in his name exclusively, and share their savings plan for the year ahead.

If you like this episode, show your support by rating us or leaving a review on iTunes (The Smart Property Investment Show) and by following Smart Property Investment on social media: FacebookTwitter and LinkedIn.

If you have any questions about what you heard today, any topics of interest you have in mind, or if you’d like to lend your voice to the show, email [email protected] for more insights!

RELATED AREAS OF INTEREST:

From property in Australia to a ski lodge in Japan
Mortgage Trusts, an alternative first step for property investors
Should a real estate title be in one person’s name only?

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A property investment plan years in the making
object(stdClass)#1203 (52) {
  ["id"]=>
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  ["title"]=>
  string(75) "Regional Victoria showing up Melbourne in price performance, new data finds"
  ["alias"]=>
  string(74) "regional-victoria-showing-up-melbourne-in-price-performance-new-data-finds"
  ["introtext"]=>
  string(139) "

Median house prices in regional Victoria outperformed that of Melbourne in the June quarter, the latest REIV figures reveal. 

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Median house prices in the regions rose 4.0 per cent to $419,500 but in Melbourne they dipped by 0.6 of a percentage point to $840,000.

The result in Melbourne was due to a 0.8 of a percentage point fall in prices achieved at auction; this was despite a lift of 2.3 per cent in private sales.

Inner Melbourne suffered due to auction prices, where median prices fell by 4.9 per cent to $1,459,000 but it was middle Melbourne that was hardest hit, with a 5.4 per cent drop to $974,500.

Outer Melbourne had a good quarter with the median rising by 0.5 of a percentage point to $681,000.

Apartment prices in regional Victoria grew by 3.7 per cent to $304,500 while the metro media was up by 0.5 of a percentage point to $604,000.

REIV President Richard Simpson said that despite fewer sales, many sectors of the market were performing well.

“2017 was a bumper year and while the trendline has flattened, despite the fall in median house prices in the June quarter, median prices are still up this calendar year for both houses and units, in Melbourne and in the regions,” Mr Simpson said. 

In particular there was been strong growth in regional centres which is probably due to the first-home buyers’ concessions said Mr Simpsons.

“The first-home buyers’ concession has been a boon for regional areas. A new entrant to the property market buying a house at the regional median will pay no stamp duty, while a first home buyer of an apartment in Melbourne at the median price would pay stamp duty of nearly $25,000,” he said.

Mr Simpson said that more prospective buyers are looking towards regional Victoria which is also having an effect in Melbourne.

“Melbourne’s outer perimeter continues to grow. Small increases in the June quarter mean that the median prices for both houses and units have risen over 10.5 per cent from a year ago.

Mr Simpson said moving forward that vendors need more realistic expectations as the highs of 2017 are now over.

“Negative chatter about the future of the sector coupled with stronger lending controls by financial institutions has created some uncertainty and vendors need to be realistic with their price expectations,” Mr Simpson said.

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Regional Victoria showing up Melbourne in price performance, new data finds

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