Banks are now talking about the OCR dropping today to 1.00% and anticipated dropping to 0.75 by year end 2020
Retail lending rates could fall further, by YE 2020 – maybe fixed rates around 3.00%
With that in mind, today, I would now change my strategy and look to fix for 12 months ( currently 3.75%) then in 12-18 months time capitalise by refixing for a longer period, maybe 3 years at say 3.55% and therefore giving you a low interest rate for an overall 4 year period.
4 years ago, $500k loan around 4.89% could see repayments $2651.00 per month
Today, $500k loan at 3.75% = $2316.00
End of 2020 = $2108.00 ( that’s a 20% drop in loan repayments per month in a 5 year period)
Note: Assumes 30 year term, principal and interest.
Borrowing money has never been cheaper, and therefore less of an outlay on the budget than where it was 5- 10 years ago.
As an example if you borrowed $375k in 2014, the loan repayments will be similar per month compared to borrowing $500k if the rates drop to 3.00%
1st Home Buyers rates ( 10% deposit)
Best deals this week.
Fixed 4.29%, with scope for a lower rate if 85% LVR
Low equity fee (one off applies)
2 years 4.59% fixed