SS Fixed Rate Futures...Poll!
- Thread starter JIT
- Start date
I voted 2010 (Jan if there had been that choice)...but that may be wishful thinking on my behalf, as thats when one of my loans comes off its current fixed rate!
Probably will be late 2009 though, knowing my luck
Chris
Probably will be late 2009 though, knowing my luck
Chris
Feb '09???
Rick,
That's like 3 weeks away, you don't seriously believe that do you? Most banks are still 1% away from Westpac who's still in front on 5.49%, are you saying this is as good as it gets?
Noel
Rick,
That's like 3 weeks away, you don't seriously believe that do you? Most banks are still 1% away from Westpac who's still in front on 5.49%, are you saying this is as good as it gets?
Noel
Hi Noel,
Im saying no one knows..my guess (and thats all that anyones is) is as good as the next.
Yeah well the poll results may back you up there, they are absolutely all over the place. No bell curves or standard deviations on that graph...
Looks like I'm getting a bit of support for my 2010 vote though !!
I guess the longer they stay low, the better for everyone...(except people trying to save cash in the bank of course)
I guess the longer they stay low, the better for everyone...(except people trying to save cash in the bank of course
)
Looks like I'm getting a bit of support for my 2010 vote though !!
I guess the longer they stay low, the better for everyone...(except people trying to save cash in the bank of course
And except for people going overseas or buying imported goods
(low IR = Low $AUD)and I voted for 2010 also
Sorry ...don't do "fixed"
I know too many people (me included) who've been bitten by "fixed". Read some books like Wealth Wizard. Mark Bouris. When you choose "fixed" you're in the banks casino and they know and control the odds. So , for lot's of reasons, I just don't do fixed. Everything is variable.
LL
I know too many people (me included) who've been bitten by "fixed". Read some books like Wealth Wizard. Mark Bouris. When you choose "fixed" you're in the banks casino and they know and control the odds. So , for lot's of reasons, I just don't do fixed. Everything is variable.
LL
Those books don't take into account the predicament of highly leveraged multi-IP owners. If you have eg. $2MM of IP debt and they're all on variable today, as the interest rate cycle goes into it's expansionary phase, you could most certainly be cactus in a few years time...and we all know a few here on SS who have been burnt by not managing interest rate risk. The next 12 mths IMHO will provide a once in many year opportunity to mitigate this risk, and one that we won't see again for some time. You might not pick the absolute bottom, but if you're even a little bit close I think you'll probably come out infront in the medium-term eg. 5 years.
JIT, conversely, if you have $2MM of IP debt and they're all on FIXED today, man, you are crying and hurting. Not only that, as 2009 progresses the "pain" will continue to get worse as IRs fall further. Not only that, you are then, in reality, locked in to your lender as the break costs just get so huge, as variable rates fall away. And if do you HAVE to sell for some reason, you WILL have to pay those break costs. Take a look at the IR historical charts, once they peak, they invariably fall off quite quickly. I.E. if you're variable, the pain doesn't actually last long and is managed by having sufficient LOC available. Not only that, it's worse, at the very time deals are around (like NOW), you're locked into your lender at (high) fixed rates so you can't take advantage of the buying opportunities. Fixed rates may make you feel more secure, but understand you normally end up paying VERY dearly for the privilege. The banks know this and that's why they love 'em.
LL
You're right re. the converse situation, but I guess the trick is just to fix near the bottom of the cycle, not near the top. And not for too long either, ie. 3-5 years would be OK. It doesn't take that much skill to figure out that we are somewhere near the bottom right now.
I've been tracking my current banks fixed vs variable rates for a few months now and while my variable rate has dropped from 7.9% to 6.3%, my 5 year fixed rate has only dropped from 7.39% to 6.99%. I doubt I will see that fall much further, possibly another .5% if varable rates fall another 2%
It makes me wonder how long it will be before we see variable rates of 7% again, if it is 2-3 years away theres no point fixing at 7%, if its 1 year away there may be. I just dont think we will have 7% variable rates in a years time, I think we may still be at about 6 - 6.5% (or lower).
The only real justification I would have for fixing at the low point is if I believed fixed rates would greatly increase within the 5 year period. This is what I'm trying to judge in my reading at the moment. The reality is that noone knows but I'm sure theres some experienced investors out there who can read the current signs better than I can at the moment.
It makes me wonder how long it will be before we see variable rates of 7% again, if it is 2-3 years away theres no point fixing at 7%, if its 1 year away there may be. I just dont think we will have 7% variable rates in a years time, I think we may still be at about 6 - 6.5% (or lower).
The only real justification I would have for fixing at the low point is if I believed fixed rates would greatly increase within the 5 year period. This is what I'm trying to judge in my reading at the moment. The reality is that noone knows but I'm sure theres some experienced investors out there who can read the current signs better than I can at the moment.
Thats what ANZ thinks. Their forecasts show all fixed rates will be going up from here, as the market has already priced in the next 6 months of var rate falls.
Their latest economic report recommends fixing now as they won't be getting any lower - see p1 & p4-5.
I'm not so sure - bond rates have continued to fall since ANZ published last week.
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