Do accountants give advice on fixing loans etc?

Just wondering if accountants are able to give general advice about fixing loans etc, or if this is something I should be asking my mortgage broker.

I negotiated some 3 year rates with WBC (not as good as 5.99% pa but close enough to 6.1%) and I'm just trying to decide whether to take it up vs the 5 year fixed rate (6.69% with a package discount of 0.2%).

From looking at the 3 and 5 year interest rate swaps the difference is about 30 bp which suggests the 3 year rate is a better "deal" at the moment, but this isn't really my area of expertise... just wondered if accountants are able to give advice or even just rough opinions on the matter?
 
Just wondering if accountants are able to give general advice about fixing loans etc, or if this is something I should be asking my mortgage broker.

I negotiated some 3 year rates with WBC (not as good as 5.99% pa but close enough to 6.1%) and I'm just trying to decide whether to take it up vs the 5 year fixed rate (6.69% with a package discount of 0.2%).

From looking at the 3 and 5 year interest rate swaps the difference is about 30 bp which suggests the 3 year rate is a better "deal" at the moment, but this isn't really my area of expertise... just wondered if accountants are able to give advice or even just rough opinions on the matter?

If depends on their licencing.

Do you need credit advice, financial advice or tax advice? Or legal advice maybe?
 
Hmm I'm not sure. I've never really dealt with an accountant apart from getting the standard old tax returns done.

Maybe "advice" is the wrong word. I don't really want something in black and white that I can come back later and sue them over. Just someone to say "yeah, I'd go 3 year over 5 year for these reasons... blah blah blah." At the end of the day it's my personal finances and I'm responsible for any of the decisions made, but I'd just like to be able to make an informed decision.

Who am I after here? An accountant who has some experience in property and general economics, not just a standard tax accountant?
 
id be surprised if any one would take a punt on that aside from where the need to fix is an "obvious" risk mitigation tool :)

how about an each way bet

2 splits one for 3 and the other for 5

minimises one risk




ta
rlf
 
Hmm, sounds in line with what I was thinking. About 1/3 variable, 1/3 fixed 3 years, 1/3 fixed 5 years. Thanks all!

PS. Rolf - I'll drop you an email if that's OK. Thinking about refinancing to chase a good 3 or 5 year rate...
 
....do you want someone to make the decision for you? Ultimately it's your money so you are responsible for it. I doubt any accountant, broker etc would tell you what you should do with respect to fixing.
 
No, that's fine Aaron, I accept that at the end of the day it all comes down to me. Never mind everyone, I think that thinking out loud on SS has helped me to come to a conclusion :) Thanks for all your help!
 
As an aside though, it is kind of scary how the general public just fixes their rates based on gut feeling rather than looking at the economics of it... I did a bit of modelling based on interest rate predictions for the next 5 years and still can't decide, so I don't know how the average Joe Blow does it!
 
As an aside though, it is kind of scary how the general public just fixes their rates based on gut feeling rather than looking at the economics of it... I did a bit of modelling based on interest rate predictions for the next 5 years and still can't decide, so I don't know how the average Joe Blow does it!

The dartboard is a great option :)

Ta

Rolf
 
the general public should be making thier decisions on their gut feelings and personal circumstances. They dont have any control over anything else in the wider economic environment. fixing thier interest rate is one of the few areas they do have a modicum of control. Some investors are able to time the market fixing interest rates, however most investors fix for the same reasons the general public does, their own personal circumstances and the sleep at night factor, not because they are sure they are able to beat the interest rate strategists at the bank.
 
Unless your accountant holds a credit licence they shouldn't be giving you this kind of advice. If I were an accountant I'd be avoiding this sort of thing because a wrong move can put you in very hot water.

At the same time, most people who are licenced will be reluctant to give advice on what's the best fixed rates strategy because it could involve making a market prediction which they have no control over.

A few years ago, it was easy to predict that interest rates were increasing. Some went up as high as 10% so fixing at 8% seemed like a good idea. What most people didn't predict is that interest rates quickly dropped to 5% (too bad if you fixed at 8%).

For what it's worth, even the Australian treasury was strongly indicating increasing rates in 2008.

When people tell me that they want to fix, I ask them why they want to fix and what they expect the outcome to be. I beleive it's a comfort factor. Fixing because you believe rates will increase is often like flipping a coin, even if you've done your economic research.
 
As an aside though, it is kind of scary how the general public just fixes their rates based on gut feeling rather than looking at the economics of it... I did a bit of modelling based on interest rate predictions for the next 5 years and still can't decide, so I don't know how the average Joe Blow does it!

This Joe Blow decided this way;

* I am not going to sell in the next 2-3 years
* Fixed rates are around 0.50-0.7% below my variable rates
* variable rates even if they move downwards, the banks will probably not pass them all through
* I knew that 0.5-0.7% would substantially improve my weekly cashflow

It actually didn't get overly more sophisticated than that
 
This Joe Blow decided this way;

* I am not going to sell in the next 2-3 years
* Fixed rates are around 0.50-0.7% below my variable rates
* variable rates even if they move downwards, the banks will probably not pass them all through
* I knew that 0.5-0.7% would substantially improve my weekly cashflow

It actually didn't get overly more sophisticated than that

If you fix, does that stop you from pulling out equity to reinvest?

Sorry if this is a stupid question :)
 
This Joe Blow decided this way;

* I am not going to sell in the next 2-3 years
* Fixed rates are around 0.50-0.7% below my variable rates
* variable rates even if they move downwards, the banks will probably not pass them all through
* I knew that 0.5-0.7% would substantially improve my weekly cashflow

It actually didn't get overly more sophisticated than that

I can recall fixing only once before (back in 1996), but when I got the marketing call from one of my lenders about a Special Offer 1 Year Fixed Rate - at slightly more than 1% below the then operative variable rate - it was certainly worth the $350 x each loan to fix for the year

That one phone call saved us equivalent to our Land Tax for the year. I would not have been interested if the deal was for more than twelve months, but what was offered suited us just fine at the time

At the end of the day, we are all Joe Blow. It's when we start to think we are 'something special' that we can start to get into trouble.

Keep it simple, remain open to suggestions, roll with the punches.

Some variable rates are nearly down to our fixed rate, but not for the particular product, so six months on we are still well pleased with our decision

Cheers
Kristine
 
The global economy still seems to be struggling to get back on it's feet yet we are faced with Banks looking to increase rates

What will the situation be when the global economy finds its feet?
 
If you fix, does that stop you from pulling out equity to reinvest?

Sorry if this is a stupid question :)

No it doesn't necessarily stop you. You can apply for further loans at the same lender using the same security.

But if your current lender says no then you may need to move banks. This is when it can cost you a lot in break fees.
 
Fixed 3 years around the 6.1% mark, thanks alll for the responses. Pretty happy with the decision as fixed rates seem to be on the rise.
 
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