In October 2007 I switched to a fixed interest rate of 7.85% for five years.
It turned out to be a terrible punt. The Global Financial Crisis hit the following year, with interest rates dipping to record lows. I shudder to think how much money I might have saved if at that point I’d locked in a low fixed rate. Maybe there’s an alternative universe version of me who held off in 2007, and took advantage of that.
Even now, my bank’s variable rate is 7.80%.
6 replies on “The gamble of fixed interest rates”
Bad luck, The only saving grace for you is that you had CERTAINTY about your re-payments over the five year period. So, if you budgeted for this, you at least know where you stand with regard your committments.
It’s a bit like buying a car for $30,000 and then next week there is a sale promotion on where you could have got the same car for $25,000.
oh I hear you … we made the same choice at about the same time, but decided to only fix half of our loan … it still hurts though … :(
A gamble for the borrowers, but rarely for the financial institutions.
Ouch – yes that would be hard to watch. My cousin is a bank manager and when the GFC hit she had months of really aggressive customers who had locked into fixed rates and then wanted to back out of it.
It is a bit of a scam – you pay a premium to have certainty of repayment. The rate is never in your favour. They factor in rate rises, never rate drops so it is always on the high side
yeah got burnt too – ended up paying the break cost ($8k) to free up some cash flow – think I ended up about $500 ahead….