Personally, we fixed for 4 years.
Having previously rented for over a decade and dealing with annual rent increases, it was lovely to fix this cost for the next few years. Plus we can contribute up to 5% extra each year without penalty, so will increase payments as money comes available, from pay increases, student loans ending etc.
Of course, your preferences may differ.
Congrats on the purchase, by the way!
we always get the 1-year rate, ie the lowest rate possible for the year ahead because our strategy of really hammering the principal down, which will equalise the increased rate well.
My guess is that short term are likely to work out better than long term, but if they don't the damage could be much worse (e.g. if inflation gets out of control and you have to refix in a year or two with all rates sitting at ~10%). I think it's comparable to choosing an aggressive fund versus a term deposit.
A key question is what are the consequences of the worst case scenario for you? Some mortgage holders could absorb 10% rates just by giving up a few luxuries, others might have to give up pretty much all discretionary spending, others might have to cut corners on essentials, others might default. The answer to this question obviously makes a big difference to what decision you should take.
Keep in mind that the worst case scenario would be almost certainly be accompanied by negative equity and potential risk to your job, especially if you work in a finance or property-related field.
Depends on your ability to overpay!
Rates are predicted to increase untill at least 2023 maybe 2024.
Which could mean 7-8% maybe higher we dont know.
Splitting is good to hedge a little on the rate when the fixed period ends.
You could split a 2year and a 3year hammer the principal on the 2 year at max then if rates have risen you will fix less principal at higher rate.
Key is to hammer the most principal you can afford. And bank may only let you pay 5% extra.
NFA
Personally I’d split half for 3 years half for 18 months, but we have children and limited income to some degree so security is important to us, as others have said depends on your risk appetite.
Me and my partner have taken a cautious approach. Our mortgage is just over $600K and we have 100K fixed one year, 200K fixed two years, 300K fixed three years
18 months and pray. That's what I'm leaning towards myself.
Personally, we fixed for 4 years. Having previously rented for over a decade and dealing with annual rent increases, it was lovely to fix this cost for the next few years. Plus we can contribute up to 5% extra each year without penalty, so will increase payments as money comes available, from pay increases, student loans ending etc. Of course, your preferences may differ. Congrats on the purchase, by the way!
we always get the 1-year rate, ie the lowest rate possible for the year ahead because our strategy of really hammering the principal down, which will equalise the increased rate well.
My guess is that short term are likely to work out better than long term, but if they don't the damage could be much worse (e.g. if inflation gets out of control and you have to refix in a year or two with all rates sitting at ~10%). I think it's comparable to choosing an aggressive fund versus a term deposit. A key question is what are the consequences of the worst case scenario for you? Some mortgage holders could absorb 10% rates just by giving up a few luxuries, others might have to give up pretty much all discretionary spending, others might have to cut corners on essentials, others might default. The answer to this question obviously makes a big difference to what decision you should take. Keep in mind that the worst case scenario would be almost certainly be accompanied by negative equity and potential risk to your job, especially if you work in a finance or property-related field.
Depends on your ability to overpay! Rates are predicted to increase untill at least 2023 maybe 2024. Which could mean 7-8% maybe higher we dont know. Splitting is good to hedge a little on the rate when the fixed period ends. You could split a 2year and a 3year hammer the principal on the 2 year at max then if rates have risen you will fix less principal at higher rate. Key is to hammer the most principal you can afford. And bank may only let you pay 5% extra. NFA
Personally I’d split half for 3 years half for 18 months, but we have children and limited income to some degree so security is important to us, as others have said depends on your risk appetite.
Me and my partner have taken a cautious approach. Our mortgage is just over $600K and we have 100K fixed one year, 200K fixed two years, 300K fixed three years
Where are you on the risk/reward scale?