So the latest and greatest from our friends at ING.
The 3 year combo rate home loan.
Don't let the name confuse you it's basically a fixed and variable rate loan split with a seriously cheap price. In layman's terms you get access to a 3.69% 3 year fixed rate when you combine it with a 3.79% variable rate loan. Its worth nothing that this is only available for new to bank security's (basically new customers), people who live in the house they have the loan for (owner occupied) and have a loan to value ratio (loan amount relative to the property value) of 80% or lower.
Here's what I like:
- The interest rate is cheap. Real cheap. Close to being the lowest in the market on both the variable and fixed side of things.
- The variable rate loan gives you all the features you want in a variable rate loan including offset, redraw, additional repayments and interest only.
- The fixed rate gives you the ability to pay interest only and you can make additional repayments up to $10,000 annually.
- There is no application fee and the annual fee is currently waived for the first year.
Here's what I don't like:
- There is a settlement fee which in my mind is really just another way to charge an application fee but call it something else. A lot of banks have this fee these days so ING are not on their own here.
- The annual fee. Lets face it, feeless banks are pretty rare these days and annual package fees are the flavour of the month.
- No redraw on the fixed rate. Having said that you would probably make additional repayments on the variable loan given the interest rate is only 0.10% higher.
- 3 years is a long time to fixed a loan and I prefer flexibility in my home loan. What doesn't work for some will work for others. If you are more comfortable with a shorter fixed period you can combine it with the 2 year fixed rate as an alternative. The rate is a little higher at 3.74% but still pretty good.
In my mind the pros out weigh the cons but one thing doesn't sit right with me and its the fixed rate price. It's too close to the variable rate offering to justify picking it over a straight variable loan with ING and with a lot of economic factors pointing to an interest rate reduction in the coming months (nothings ever certain) it would make sense to just get the 3.79% variable rate. Remember ING does not have to pass on the full interest rate reduction if there is one but I'd bet it would move by at least 0.1%. Time will tell.
It is a good product but I'd just get the variable one on its own.
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Information as at 26/07/2016