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What’s better: Fixed rate or variable rate home loan?

By ACTResident 22 July 2015 65

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I am going to borrow home loan from the bank and have three options: fixed rate, variable rate and half and half.

Would you please advise here what option I should take. You are welcome to comment on ‘owner occupier’ or ‘investment’, and three different options because your comment may benefit others even if it does not directly apply to my situation.

My idea is to fix the rate as I see the interest is very low now, but who knows it might go further down. I do believe we have economists out there.

Thank you for your comments and sharing ideas.


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What’s better: Fixed rate or variable rate home loan?
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arescarti42 12:49 pm 17 Aug 15

Ezy said :

Sleeping in? Nah, it was after midday.

I had another agent with me at the auction who we have crossed paths many times before, we had a chat before hand and I told him I think it would go for around 520-525k. He agreed – it looked like it wasn’t actually going to even get over the 520 at one stage.

Yep, another very strong result with prices in Weston Creek rising rapidly in recent weeks due to the Mr Fluffy saga.

In a few months time this block will be rezoned, the house knocked down, and a block of apartments erected and sold to rich Chinese investors. The apartments will cause the surrounding houses to go up in value, which will make the apartments go up even more in value.

Yep, if you want to live in this area, you should get in quick because prices are on the up!

Ezy 9:01 am 17 Aug 15

Sleeping in? Nah, it was after midday.

I had another agent with me at the auction who we have crossed paths many times before, we had a chat before hand and I told him I think it would go for around 520-525k. He agreed – it looked like it wasn’t actually going to even get over the 520 at one stage.

blandone 8:17 am 17 Aug 15

Ezy said :

vintage123 said :

Ezy said :

vintage123 said :

Ezy said :

vintage123 said :

Ezy said :

Yup – exactly what I thought. Thats a very generous price.

Unfortunatley it will go between 625k and 650k. They would probably accept a pre auction offer of 650k.

The reason the prices have risen quickly in weston creek is due to the fluffy saga.

To be blunt, there has been considerable lobbying occurring behind the scenes regarding the rezoning of the fluffy blocks, and the precedence this sets for the unaffected blocks in the same streets and suburbs.

Developers have basically lobbied to say, we won’t touch them unless you allow unrestricted rezoning of the whole suburb, and green light seperate title subdivisions on 700m2 blocks.

So more than likely, once the governments works out that they will cash in considerably under a comple rezoning arrangement, the decision will be made to allow anyone to subdivide as long as the block is over 700m2, and they will be able to apply seperate title.

Therefore, anywhere near a cluster or in the general suburb currently on the market over 700m2 is considered desirable for those wishing to land bank or develop in the future.

Like I have said before, if you want to live in the area, grab something sooner rather than later, as prices are on the up.

Interesting, and thank you for the explanation – but given the information you are getting, the only people that would see this as a 650k block are those developer types. General Joe Public (me) look at this as and compare it to a similar house that sold in this street a few months back for 505k. To be honest, I haven’t seen many houses jump in value significantly over the last few weeks. If anything, they are the same as a few months ago.

The problem for me at this stage is lack of homes that offers good bang for buck renovation/extension potential. This particular home for me isn’t one I am interested in due to the way the house is skewed on the block. I have already sketched out a few extension ideas and what I had in mind wouldn’t be achievable due the building encroaching 1.5 metres from the boundary.

http://www.realestate.com.au/property-house-act-weston-120042137

Thats a different kettle of fish all together though – That house sold for 599k two years ago. The reason it fetched that 625k is because it was in an elevated position in Weston and on a nicer street. These houses always fetch a higher price than those down a few streets like the one we are discussing.

More recently, two houses sold on Sturges street. One for 440k! It was back in May and before some more information was released RE: Mr Fluffy, but I am seeing this from someone who is not too privy to what developers are doing behind the scenes.
http://www.realestate.com.au/property-house-act-weston-119620311
http://www.ozpropertyview.com/property-view/ACT/1386663844/9-Sturgess-Place-ACT/

My opinion – this house will go for around the 530 mark. Happy to eat my words, and have an ‘I told you so’ written to me, but I am just going on what I have learned in the 8 months of looking for property in this area. If it goes for the price you are saying, kudos to you – and ‘holy shit I better get my ass into gear’ to me.

Ezy, mate if you can get it for 530k then grab it. Dont overthink extensions or renovations, at the end of the day the land size in Weston will ultimately determine the value of homes. The other thing is if you buy one and overcapitalise through extensions or renos, your just throwing money away.

The only way i have seen people make money on renos, is if they are tradies, or they have family that are, or they convert a garage to a room etc. If you have to apply to council and get the tradies in, the cost are likely to be so high, that you may have well spent more initially purchasing a bigger house.

I would grab it at 530k if possible, do nothing to it, just live in it and set your loan up as i pointed out at point one, build some equity, noting your equity will come from the loan structure plus capital growth.

Just letting you know that I attended the auction for this home today. It went for 522k. Pretty much around what I was thinking.

Keen to hear from Vintage 123 on this one, the developers must have slept in on Saturday

trudi 6:01 pm 15 Aug 15

Only go for a fixed rate if you are concerned that interest rates will rise in the near future, otherwise, go variable. At the most, if you are nervous, lock in about 1/2 of the loan.

The drawback with fixed interest loans is that you are limited to how much you can reduce the loan amount by. So by going 50/50, you have the opportunity to pay the minimum amount on your fixed rate portion and extra in your variable portion.

Better still, attach an Offset account to your variable loan, provided the savings amount is fully offset against the loan, ie the virtual interest rate on your offset account matches the real interest rate of your loan.

Ezy 3:22 pm 15 Aug 15

vintage123 said :

Ezy said :

vintage123 said :

Ezy said :

vintage123 said :

Ezy said :

Yup – exactly what I thought. Thats a very generous price.

Unfortunatley it will go between 625k and 650k. They would probably accept a pre auction offer of 650k.

The reason the prices have risen quickly in weston creek is due to the fluffy saga.

To be blunt, there has been considerable lobbying occurring behind the scenes regarding the rezoning of the fluffy blocks, and the precedence this sets for the unaffected blocks in the same streets and suburbs.

Developers have basically lobbied to say, we won’t touch them unless you allow unrestricted rezoning of the whole suburb, and green light seperate title subdivisions on 700m2 blocks.

So more than likely, once the governments works out that they will cash in considerably under a comple rezoning arrangement, the decision will be made to allow anyone to subdivide as long as the block is over 700m2, and they will be able to apply seperate title.

Therefore, anywhere near a cluster or in the general suburb currently on the market over 700m2 is considered desirable for those wishing to land bank or develop in the future.

Like I have said before, if you want to live in the area, grab something sooner rather than later, as prices are on the up.

Interesting, and thank you for the explanation – but given the information you are getting, the only people that would see this as a 650k block are those developer types. General Joe Public (me) look at this as and compare it to a similar house that sold in this street a few months back for 505k. To be honest, I haven’t seen many houses jump in value significantly over the last few weeks. If anything, they are the same as a few months ago.

The problem for me at this stage is lack of homes that offers good bang for buck renovation/extension potential. This particular home for me isn’t one I am interested in due to the way the house is skewed on the block. I have already sketched out a few extension ideas and what I had in mind wouldn’t be achievable due the building encroaching 1.5 metres from the boundary.

http://www.realestate.com.au/property-house-act-weston-120042137

Thats a different kettle of fish all together though – That house sold for 599k two years ago. The reason it fetched that 625k is because it was in an elevated position in Weston and on a nicer street. These houses always fetch a higher price than those down a few streets like the one we are discussing.

More recently, two houses sold on Sturges street. One for 440k! It was back in May and before some more information was released RE: Mr Fluffy, but I am seeing this from someone who is not too privy to what developers are doing behind the scenes.
http://www.realestate.com.au/property-house-act-weston-119620311
http://www.ozpropertyview.com/property-view/ACT/1386663844/9-Sturgess-Place-ACT/

My opinion – this house will go for around the 530 mark. Happy to eat my words, and have an ‘I told you so’ written to me, but I am just going on what I have learned in the 8 months of looking for property in this area. If it goes for the price you are saying, kudos to you – and ‘holy shit I better get my ass into gear’ to me.

Ezy, mate if you can get it for 530k then grab it. Dont overthink extensions or renovations, at the end of the day the land size in Weston will ultimately determine the value of homes. The other thing is if you buy one and overcapitalise through extensions or renos, your just throwing money away.

The only way i have seen people make money on renos, is if they are tradies, or they have family that are, or they convert a garage to a room etc. If you have to apply to council and get the tradies in, the cost are likely to be so high, that you may have well spent more initially purchasing a bigger house.

I would grab it at 530k if possible, do nothing to it, just live in it and set your loan up as i pointed out at point one, build some equity, noting your equity will come from the loan structure plus capital growth.

Just letting you know that I attended the auction for this home today. It went for 522k. Pretty much around what I was thinking.

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