Buy while fixed rates are low ?

[RetiredBy50]

I am just thinking if now is right time to buy IPs while the int rates are low ?

Let say you buy a number of IPs at low fixed rates now.

Assuming the 5 yr fixed rate (6.3%) is used.

Year 1: 6.3%
Year 2: 6.3%
Year 3: 6.3%
Year 4: 6.3%
Year 5: 6.3%

Total :31.5%

Assuming the variable rate for next 5 years will be creeping up:

Year 1: 6.5%
Year 2: 7.5%
Year 3: 8.5%
Year 4: 9.5%
Year 5:10.5%

Total :42.5%


It will cost you (42.5 - 31.5) 11% interest more on your investment with variable rate.

If your portfolio has 1 million loan amount, it will cost you 100k more during 5 years using the variable rate.

What do people think about the property prices in next 5 years ?
(Up or Down or Same)

I presume most people will say Up?

In that case, don't you think you should buy IPs at low fixed rate now ?

People waiting for property prices to come down.
The more they wait, the more it will cost them more.

 

[MarkB]

RB50

May I ask where you got those variable rate forecasts from?

Do you think the banks would be offering a 5 year fixed rate of 6.3% if they really believed that at that same time variable rates would be at 10.5%?

The way I see it - at this very point in time - the yield curve fairly flat over the next five years.

MB

fyi... have a look at:

http://www.somersoft.com/forums/showthread.php?s=&threadid=11017

http://www.somersoft.com/forums/showthread.php?s=&threadid=11194

 

[Bmok]

Hi all,

I was listening to Robert Mellor from BIS Shrapnel last week and his organization appears to feel that (if all current indicators remain as they are) interest rates will remain level for the next 12 months and then rise up by the middle of next year with rate hikes in 2005 & 2006 up to 10%. Then by June 2008 rates would be back down to 7 or 8%.

He mentioned that we may need to lock into 5 year fixed rates now to protect our positions.

Cheers, Bmok