Home loan: some progress at last

Here’s a graph of my home loan, which I got just over nine years ago.

The loan was approved in August 2005, but only took effect in October that year (the huge leap on the left).

Home loan balance, August 2005-August 2014

In the first year or so I was able to pay it down a bit. It only took me about 8 months to get the balance down to 95% of the initial loan. With interest burning up most of the payments, it took another 5 years to get down to 90%. This of course is why the graph looks jaggy — each month we go down a bit, and up a bit.

In the past few years I haven’t concentrated on paying it down further, but I do have a healthy working balance in an offset account. That combined with the current low interest rates have meant it’s taken under 3 years to move down from 90% to 85%.

The bank reckons the current forecast term is still 20 years and 3 months (gulp).

The nature of big loans is that the balance starts to drop faster the further you are into it, but one way of ensuring that would be to lock-in a fixed interest rate. The last time I tried this was precisely the wrong time — just before the Global Financial Crisis sent rates tumbling.

Still, rates are pretty low at the moment, so now might be a good time… though you can bet whichever way I go, the bank will win.

The gamble of fixed interest rates

In October 2007 I switched to a fixed interest rate of 7.85% for five years.

It turned out to be a terrible punt. The Global Financial Crisis hit the following year, with interest rates dipping to record lows. I shudder to think how much money I might have saved if at that point I’d locked in a low fixed rate. Maybe there’s an alternative universe version of me who held off in 2007, and took advantage of that.

Even now, my bank’s variable rate is 7.80%.

D’oh.