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Interest rate rises - ouch!

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| 22 Nov 2010, 05:58 AM Agree 0

Just got the last bank letter on what the interest rate rise is going to do to my loan repayments, and it’s not pretty. Is everyone else feeling the pain? Is it worth refinancing now, or is it worth hanging on until in case of more rate rises and better deals coming out?
  • Hank Barker | 22 Nov 2010, 11:20 PM Agree 0
    Fortunately, I've always kept a substantial buffer for rate increases. Refinancing is only worthwhile if you're better off with the new mortgage.
  • Rob Williams | 23 Nov 2010, 01:06 AM Agree 0
    You better brace for impact. There will be further rises over the next 12 months or so.
    I think NAB's current service rate is running at over 8.5%, so they are assessing your ability to service a loan at that rate, not the curretn variable. There's a reason they are doing that and it' not just because they want a safety margin built in, either.
    If rates hit 7.5% that will only take them to their 10 year average, from memory.
    Rate rises, like every other contingency in property investment needs to be planned for. That's what buffers are for. No point changing lenders as you will likely end up paying the same rate and burning exit, application and valuation fees in the process.
  • Jamie M | 29 Nov 2010, 07:38 AM Agree 0
    Just got the last bank letter on what the interest rate rise is going to do to my loan repayments, and it’s not pretty. Is everyone else feeling the pain? Is it worth refinancing now, or is it worth hanging on until in case of more rate rises and better deals coming out?

    It can be. Depends on a few factors. How long have you had the loan? What's the current LVR?
  • Mortgageandlease | 30 Nov 2010, 01:27 AM Agree 0
    Most banks are required to factor in additional rate rises when allowing for servicing for a client on a new loan or increase.

    A basic rule of thumb is that they allow for 1.50% over the current variable rate, which allows for an additional 6 rate rises or 25 basis points.

    This is set out in part in legislation and the responsible lending practices that all lending institutions should be adhering to.

    This is not an indication that rates will actually rise to that level, but a bank has to be satisfied that if it does, then the client can still afford payments at that level.
  • Herman | 16 Mar 2012, 06:52 AM Agree 0
    This is true if the interest rate rises i will also going to surprise because i was not expecting this from my bank.
  • JoemelY | 01 Aug 2012, 10:29 AM Agree 0
    It is a bad news for those home buyers who want to get a mortgage with a high interest rate. Although they mostly depend on mortgage loan in order to afford to buy a home.
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