Should you break your interest rate right now and refix? There is a simple way to work out the actual profit or lack of it. We actually offer this as a service to our clients on a simple easy to understand sheet.
Variables to be considered include
- The break fee
- Any possible cash back you may have to pay back if changing banks(also when this expires)
- The difference between your current fixed rate and the current market rate for the remaining term
- Possible new cash incentives from other banks or your own bank(less likely)
Once you have all these variables, you can check the true profit of breaking and refixing.
Other reasons to break
Sometimes you might feel like they you more certainty than what is offered by the remaining term. So for example you have something coming up in six months, like your family is about to go down to once income due to a new born.
To ensure you can afford to get the through the period with one income it could pay to break and refix for a longer term.
Sometimes clients do speculate and feel rates may go up in six months so it can be better to grab what they can now. This can be smart if you think you may not be able to afford a big increase. However if you consider breaking for purely trying to out guess the market – you might find more trouble than value.
