Borrowers with an owner occupied mortgage would sometimes wish to be 100% insulated from interest rate fluctuation. Taking up a fixed rate product in its entirety, however, have disadvantages:
• Cap on additional repayment of $5,000 - $10,000 per annum
• Redraw facility is not offered
• 100% offset facility is not offered.
Partial offset facility, a marketing gimmick, is sometimes offered. CUA is Australia's largest credit union. It offers a niche where it premium fixed rate home loan comes with 100% offset facility. If a $500,000 mortgage is taken up and up to $100,000 can be deposited in the offset account in the next 3 years, the mortgage can be split into:
• $400,000 3 years basic fixed without offset facility
• $100,000 3 years premium fixed rate with 100% offset facility
The maximum amount that can be deposited in the offset account is $50,000. To get around this, the borrower can open two sets of premium fixed rate loan accounts.
CUA does not charge ongoing fees. Its:
• 2, 3 & 5 years basic fixed rate without offset is @ 3.89%, 3.96% & 4.28%
• 2, 3 & 5 years premium fixed rate with 100% offset is @ 4.06%, 4.13% & 4.45%