Booking Interest Rates

21 December 2016

If you are on a fixed interest rate and it is coming to the end of it’s term you have the choice to book another fixed rate or go on to a variable rate.  Going on to a floating interest rate will incur no fee but refixing your loan may attract a flat “refix” fee between $150 - $200.

Different lenders have different policies if you are wanting to refix your loans.  Most lenders will let you book a rate in advance – that means a month or so before you are due to come off your fixed home loan they will lock in a fixed rate available today and you are guaranteed that particular rate when you come off your existing fixed term.  Booking rates in advance can be a good strategy if you think rates are on the rise, however you do need to be aware of the pitfalls in doing this.

When you book a rate the Lender goes to their funder and books that rate.  In other words they have committed to uplifting those funds at that interest rate.  While the expectation is that the fixed interest rates will either stay the same or increase, if by some chance the fixed rates dropped and you want to change to the lower interest rate from the one that you have booked, you will have to break your contract with the Lender.  Some Lenders will charge you a flat fee for breaking your Lock Rate Agreement but some will charge you a penalty based on the difference between what they booked those rates at for you and what they can now lend that money out. 

It is important to make the decision early as to what you will do when coming to the end of a fixed term.  If you go on to a variable interest rate then make the decision to do so – don’t just simply revert to that because you delayed in making a decision.    We would always recommend when you are coming to the end of a fixed rate make sure that you contact your Adviser and tell them what your immediate plans and priorities are.  Your Adviser can identify opportunities within the market and the client’s personal situation.  They can then make a recommendation as to what terms to have your loan put on.  They can also then negotiate the terms of this which may include discounts on the new interest rate and the waiving of the refix fee.  Coming to the end of a fixed term need not be a scary thing – in fact it could be a great opportunity but only if you are well informed. 

 

 

 

 

Published In Whakatane Beacon

This post was written by

Trish Marsden - who has written 96 posts

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