They Say Rates Are Being Cut: So Why Is My Loan Interest Still the Same?
On the news, there's all this fuss about rate cuts, but my loan interest hasn't gone down at all. I looked into it, and apparently even variable rates have their own benchmark indices, and when those are reflected varies from case to case.
I'm debating whether to switch to a fixed rate, but I've also heard that switching now could mean higher fees, so I'm torn.
9 answers
Agreed, same here. Whenever I look at the news, everything seems to be crashing, but my bank account won’t budge.
First, check whether the variable-rate benchmark is COFIX or whatever. Many products have a six-month reset cycle, so even if rates fall, it won't be reflected until two or three months later.
Well, that's a bit... a policy rate cut doesn't mean loan rates will drop, does it? You also have to look at banks' funding costs and the spread. It's a bit premature to judge based only on a news headline.
I switched to a fixed rate last year, and the early repayment fee alone came out to over 200 lol. Before you switch, crunch the numbers first, seriously.
Got a source? What exactly do you mean when you say the metrics are all over the place?
Some banks use a three-year sliding scale for early repayment fees, and some products waive them altogether. So don’t assume you’ll always have to pay—shop around at three or four banks and compare. I switched without doing that and ended up losing out.
But there’s no guarantee rates will go down further. I don’t think there’s any need to rush. It’s not like everyone switching right now is doing it because they’re certain.
If you switch to a fixed rate, you'll regret it later when rates drop further. If rates rise instead, you made the right call. Ultimately, it's a matter of timing, but you should go with what you can comfortably afford.
The biggest problem is that banks don't explain this. If you go to the counter and ask, they'll tell you everything, but they only tell you if you ask first lol