Having a bit of a ponder this lovely Saturday morning and woud like to ask people's thoughts.
I have a large purchase due to complete at the end of next week. Finance is in place - 100 percent fixed for 3 years. I like fixed loans because its important for my SANF - I will be running pretty close to serviceability thresholds for the next 12 months.
By the same token I am well aware of the interest rate cuts everyone has banked for the end of this year and 2009.
My thinking is that a few good cuts in interest rates should spur a mild recovery in property prices. If things get really crazy and the RBA drops rates by 200 basis points we could have a boom.
In these circumstances I would consider exiting my fixed position, paying the whopping exit fee (it could be 20k...) and locking in at the much lower rate to free up cashflow for another purchase. The exit fee would be capitalised.
I am thinking so long as the CG on the property prior to exit is, for example, four times the exit fee, it woudnt really hurt.
I haven't really thought this through yet but would like to hear what other people think about using this to "hedge" against lower interest rates.
I have a large purchase due to complete at the end of next week. Finance is in place - 100 percent fixed for 3 years. I like fixed loans because its important for my SANF - I will be running pretty close to serviceability thresholds for the next 12 months.
By the same token I am well aware of the interest rate cuts everyone has banked for the end of this year and 2009.
My thinking is that a few good cuts in interest rates should spur a mild recovery in property prices. If things get really crazy and the RBA drops rates by 200 basis points we could have a boom.
In these circumstances I would consider exiting my fixed position, paying the whopping exit fee (it could be 20k...) and locking in at the much lower rate to free up cashflow for another purchase. The exit fee would be capitalised.
I am thinking so long as the CG on the property prior to exit is, for example, four times the exit fee, it woudnt really hurt.
I haven't really thought this through yet but would like to hear what other people think about using this to "hedge" against lower interest rates.