We’re in a Fix!

Hi Scott,

Around 18 months ago we fixed our mortgage rate at 4.84 percent for three years, thinking it was at the bottom of the cycle. It has since dropped several times. Our minimum repayments are $378 per week, but we pay $450 on approximately $195,000. It will cost about $2,500 to get out of the fixed rate. Would we be better off financially staying put for another 18 months, or changing?

Donna

Hi Donna,

Your situation is exactly why I advise people not to fix, unless they’re on the bones of their backside.

You’re paying about 1 per cent over the odds right now -- and Commbank is forecasting we’ll get another two interest rate cuts this year (though they didn’t forecast whether they’ll actually pass them on!). Still, your relatively small loan balance means that it’s currently costing you about $100 a month.

Contrast this to your $2,500 break fee, and I think it makes sense to ride this out. But make sure you learn your lesson -- and screw down get the cheapest variable loan you can in 18 months’ time!

Scott