.5 % increase in interest rates = a 50% increase in expences ????

[The Wild One]

I usualy love crunching numbers concerning my investments, because it gives me confidence that I'm on the right track.

However, I'm now feeling a little sick and worried ??? Should've fixed my loans at 6.5% when I had the chance.

What has made me pour another strong drink is my latest number crunching. Every time that interest rates increase by .5 %, will cost me an extra 50% in holding costs ?? How's that ??

My total interest payment at 6% ( 6% is when I run negative again ) will be $69480 + $23800 for council rates, Body C, manager etc.
Total costs at 6% is $93280, minus rents = neg $2,280

Now total costs at 6.5% including outgoings will be 99070, minus rents = neg $8,070. That's a 250% increase in costs.

At 7% my holding costs will be $13,860
At 8% my holding costs will be $ 25,440. That's an increase of 10 times compaired to 6% interest.

Has anyone else done their numbers on exacly what a rate rise of 2 or 3% will cost you ???

 

[Rolf Latham]

Hiya

if your current variable is 5 %, then a 50 pt increase means your interest cost increases by 10 %.

But when u are near neutral, the holidng costs are near zero, so any increase looks like a huge %

The actual numbers are more relevant to you

Welcome to RBA inflation control

ta
rolf

 

[Player]

It's tax deductible

Interesting perspective........don't forget to allow for your tax rate to soften the blow to mind and that sick stomach feeling.

 

[sash]

Which is what I have been saying on my Time to Fix thread.....

Look at this way...for every 0.5% rise on a 100K it will cost $500 dollars. So on a largish portfolio say $1.5m....it will cost $7.5K. If it goes up 2%...then it will be $30K.

In my experience....most people don't understand this or risk management...this is the sort of thing which brings people undone more so often than job loss (i believe Steve Adel hit on the head on this).

I usualy love crunching numbers concerning my investments, because it gives me confidence that I'm on the right track.

However, I'm now feeling a little sick and worried ??? Should've fixed my loans at 6.5% when I had the chance.

What has made me pour another strong drink is my latest number crunching. Every time that interest rates increase by .5 %, will cost me an extra 50% in holding costs ?? How's that ??

My total interest payment at 6% ( 6% is when I run negative again ) will be $69480 + $23800 for council rates, Body C, manager etc.
Total costs at 6% is $93280, minus rents = neg $2,280

Now total costs at 6.5% including outgoings will be 99070, minus rents = neg $8,070. That's a 250% increase in costs.

At 7% my holding costs will be $13,860
At 8% my holding costs will be $ 25,440. That's an increase of 10 times compaired to 6% interest.

Has anyone else done their numbers on exacly what a rate rise of 2 or 3% will cost you ???

 

[Strannik]

My total interest payment at 6% ( 6% is when I run negative again ) will be $69480 + $23800 for council rates, Body C, manager etc.
Total costs at 6% is $93280, minus rents = neg $2,280

Now total costs at 6.5% including outgoings will be 99070, minus rents = neg $8,070. That's a 250% increase in costs.

At 7% my holding costs will be $13,860
At 8% my holding costs will be $ 25,440. That's an increase of 10 times compaired to 6% interest.

so why would you want to to go from cf+ property to deficit of $8070 straight away?

long term, variable is more profitable. now those who fixed at 4.99 or close to that made the right call, but fixing at 7.xx now is plain silly, risk management or not. if you want to manage your risk, it's better to put those extra 2% into an offset account now to allow for future rates increases, that's a much better risk management strategy.

 

[Nathan]

I have loans fixed @ 8-8.5%.

When rates rise by 1.5% my higher rates will be coming off so worse case they will wipe eachother out.

Also I have factored in high rates with mine being fixed @ these ranges.

I have some low fixed ones aswell.

But yeah, need to have plan in place for a rising tide, because theres a lot a water to consume.

 

[kum yin lau]

Hi, didn't most of us see what the devil looked like last year?

Any talk of rate rises should be squashed by today's stock mkt performance, I think.

But it's good to be nervous & do the calculations. All of us do. I used to add the cents in the last significant number column and write gains in green ink and losses in red.

KY