Split Loans Now To Beat Rate Rise
Sun Herald
Sunday May 7, 2000
IF you hurry, you can still beat this week's 0.25 percentage point rise in mortgage rates.
Some lenders are offering two and three-year fixed rates at below the new standard variable rate of 7.8pc, expected this week.
The National Australia and St George banks raised their rates on Friday by 0.25pc.
On an average $150,000, 25-year home loan every 0.25pc rise in rates costs $24 a month in repayments.
Lenders caution against fixing your whole mortgage, but most suggest the way to go is to have a split loan of some variable and some fixed term.
Endeavour Credit Union is offering a two-year fixed rate of 7.6pc, but the cheapest deal is Suncorp Metway's 7.5pc for three years.
It also pays to shop around because advertised rates aren't always as low as a bank will go.
The managing director of Mortgage House, Ken Sayer, warned borrowers not to fix their whole loan.
Mr Sayer said the only way to beat interest rates was to increase repayments so that the loan was paid off earlier.
Honeymoon rates could also be used to a borrower's advantage, according to Lee Boueri, director of Yes Home Loans.
Yes is offering an introductory rate of 6.53pc, shortly to rise to 6.78pc. ``You can refinance your loan by taking half of it out at the discount rate and the other half at the fixed rate," Mr Boueri said.
Analyst Cassandra Williams of the independent research house Cannex suggested borrowers split their mortgages three ways: part basic no frills, part standard variable and part fixed.
``Because some basic rates are still below 7pc, that could save you up to 0.5 per cent from the standard variable rate," Ms Williams said.
She added that for the fixed portion, three years was ``a good medium term".
Cannex had not been recommending fixed rates while they were above variable rates but ``for those who want to, this is a safe time to fix".
© 2000 Sun Herald