Fixed or Variable Rates

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From: Larissa Brady


I have just bought my first IP, trying to follow the basic ideas of Jan Somers. However, I ended up opting for a variable rate IO loan on the influence of my broker. Is this a serious mistake? If so, is it possible to change or refinance if rates start going through the roof? Does anyone think rates will go through the roof or settle down soon?
Grateful for any info:)
 
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Reply: 1
From: Rolf Latham


Hi Larissa

Most I/O variable loans can be converted to a fixed with a simple switch. Whihc Lender ?

Ta

Rolf
 
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Reply: 2
From: Jas


> From: "Larissa Brady" <larissabrady@yahoo.com>
>
> I have just bought my first IP, trying to follow the basic ideas of
Jan
> Somers. However, I ended up opting for a variable rate IO loan on the
> influence of my broker. Is this a serious mistake? If so, is it
possible
> to change or refinance if rates start going through the roof? Does
anyone
> think rates will go through the roof or settle down soon?
> Grateful for any info:)

Firstly, lots of economists reckon that rates have a fair bit of upwards
movement left in them.
Whether variable is good for you depends on whether you want to access
further capital gains in the next couple of years. If you have a fixed
rate loan, you can't break it without paying break costs (and these can
go quite high). On the other hand, maybe the property you've bought is
only just cashflow +ve, and further rises would send it -ve. In that
case, you're in trouble either way as the fixed rate is about 1% higher
than the variable.
The main reason for fixing is give certainty to your costs. Fixed rate
means that you'll have no worries about how much higher or lower the
expense will be.

Should you decide to fix, talk to your bank about doing so. That part
is really easy.

Jas
 
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Reply: 3
From: Larissa Brady


I am with the ANZ. I guess I'll just see which way the wind blows & switch if it gets too hair raising.

Thanks:)
 
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Reply: 3.1
From: Andrew G


I think I was lucky - I managed to fix both of my IP loans in at 5.95% a few months back .... seems to have paid off so far since everything has been on the rise since then, even the variable at the moment is more.

You never know how it will go though.

Andrew.
 
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Reply: 3.1.1
From: Kellie Dutton


Hi
Fixed rates are still considerably higher than variable, less so % wise than before the rate rise but still quite a bit higher. In the next 12 months (and this is personal opinion, not broker opinion) I don't believe variable rates will increase to the current fixed rates. There are plenty of products you can get with 12mth honeymoon fixed that revert to reasonable, ie competitive variable rates. Would advise you to have a look at everything around, whether standard variable or honeymoon vs fixed and crunch the numbers, then make an informed choice.

Kellie
kdutton@smartline.com.au
 
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Reply: 3.1.1.1
From: Russell Chellew


Hi ,

As you are looking for an I/O loan I would not be recommending ANZ honeymoon product as it is P& I repayments not I/O .

ANZ do offer a I/O variable @ 5.97% at the moment which might be worth considering then switch later to fixed if you are concerned about future rate rises.

cheers


Russell
 
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Reply: 3.1.1.1.1
From: Mac Duus


What are the current 'average/median' fixed and variable rates? What economic indicators suggest variable rates will not rise above the current fixed rate (if one was to fix now) over the next 3 - 5 years?

Mac.
 
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Reply: 3.1.1.1.1.1
From: Anonymous


Hi,

keep in mind the interest rates where at an all time low,people went crazy bought bought bought,rental returns decreased (in the north shore of Sydney) due to this too much supply little demand. With the governments $7000 or $14000 grant why not buy?
how high can the rates go? the government knows people have gotten themselves in alot of debt,i believe yes they will go up but not too high,if you are worried it is probably best for you to fix the loan,look around for a good rate this way you know exactley what your repayments will be particulary if you have a large loan - do what you makes you feel comfortable.
 
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