“Variable rates are significantly lower than they were a year or two ago, which means that if I'm on a fixed rate of 4%, and I see variable rates in the 2s now, I've got this feeling I want to cancel my fixed rate and switch to a variable rate to pay much less interest. Is it a good idea to break our fixed rate and go on a variable rate?”
On a recent webinar, here’s what Inspire’s mortgage broker, @ColinO’Loughlin said -
Generally, to get your fixed rate break costs, you'll need to talk to your existing lender. You can sometimes provide us with an authority to find out what those break costs are for you. However, with these rebates at the moment to move to another bank, it can soak up a majority of those costs. It will also vary on how much you've borrowed and the rate you’ve locked in at that point of time.
So, if you've locked your fixed rate for three years, and you've only been there for six months, we work out the interest of what you would earn with today's market, multiply that over a two and half year period and compare it to what you're earning now. That ultimately will give us what your savings will be versus the costs to break your fixed rate.
This is a case-by-case basis, but more times than not, you're going to see massive savings on the interest and rebate front and will make sense to potentially cancel your fixed rate at this point in time.
It also varies from bank to bank. It’s just a phone call away saying, "Hey, look, I’m interested in knowing if I was to break my fixed rate today, what would that cost be?" And they will provide you with a figure over the phone. Send that figure to us, we'll do the math for you and let you know whether it's beneficial. We’ll weigh everything up and what that looks like from a cash flow point of view moving forward.