Fixed Rates going berserk!!
- Thread starter Lukey13
- Start date
Now calm down diddly diddly
Its only 0.35% in the last 2 weeks.....and lines like "Fixed Rates going berserk!!" is alarmist. You could get a job on ACA with headlines like that lukey boy. And then factor in a 50% cut on that for ppl doing the neg gearing thing - and its barely noticeable. Settle Petal. (sorry its been Mardi Gras in SYD lately)Mmmmmm maybe, maybe not.
Yep its all impending D&G hey? I don't wish to say "I told you so" but I did say it was too early to be fixing rates just yet. IMHO you need to fix rates before we go into the R word (if we do) and ride out the 2 or 3 years of high rates. The last thing you want to do is come out of a low fixed rate into a high one during a recession (ssssh). Or fix rates for 10 years & be done with it (if you don't bank on % rates coming down).
What to do now? Look to increasing your income, raising rents, doing small cosmetic reno to increase rents, put LOC in place, or last last resort sell - but not at fire sale prices. You look to be in a position with time on your side.
My 2c.
Aimjoy
Not sure if he did over-react.
If banks are fixing 5 year rates at 8.8%, means that they think the average over the next 5 years will be 8.8% I.e., they don't think rates are coming down at the end of the year, like most people are predicting...
A few months ago, when I checked, a 5 year fixed rate was lower than the std Variable.
If banks are fixing 5 year rates at 8.8%, means that they think the average over the next 5 years will be 8.8% I.e., they don't think rates are coming down at the end of the year, like most people are predicting...
A few months ago, when I checked, a 5 year fixed rate was lower than the std Variable.
This guy is worth reading.....
http://www.princeton.edu/~hsshin/working.htm
just skimmed
Leveraged Losses: Lessons from the Mortgage Market Meltdown
http://www.chicagogsb.edu/usmpf/docs/usmpf2008confdraft.pdf
and it offers excellent insight into how sub prime might play out......
http://www.princeton.edu/~hsshin/working.htm
just skimmed
Leveraged Losses: Lessons from the Mortgage Market Meltdown
http://www.chicagogsb.edu/usmpf/docs/usmpf2008confdraft.pdf
and it offers excellent insight into how sub prime might play out......
Not exactly. That means they are going out into the market and finding that the MARKET is expecting 8.8% over the next 5 years. It's not just about what will happen next year, but what rates will average over 5 years.
Alex
Did you know fix rate and variable rate are sourcing from different source?
it doesn't mean bank lose money when interest rate goes up..they just fund it differently and you the borrower will always pays... Banks always make their margin. In the 80's they made this mistake and they lose money on fixed rate if interest gone too far.. NOT any more
.. they change their funding model.I happen to invest in banks so I intimately know how they make their money as part of my criteria to buy a business I understand real well and know exactly how business make their money.
the only advantage you see as a borrower is the saving you get if interest goes up
.. Banks hidden all the argie and bargie stuff from borrowers but they always make their margin. Fixed rate require a bit more work than variable but they do always have margin on top.that why banks are happy to go with what ever way you want, fix, variable, mixed half fix half variable
.. you chose the combination they chose the combination of margin that not how it works..you wanted a 5 years fixed loan..what banks do is
they throw that money to the market and said I want XXX for 5 years
what do you guys want to charge me. Dealers come back with 8.0%
including his margin... banks than takes 8% and include its margin then pass it on to you the borrower as 9% etc.. I just pick a random number what essential how it works.
so interest rate goes up to 20% ? so what bank still get their 1% margin and they pay their dealers 8% ... so dealers and under-writer will miss out but not banks
beautiful stuff inst it
Interesting wild dog.
Where are Aussie banks sourcing money from these days? Japan, Middle East, China, US, Euro?
Word has been the Japanese carry trade is drying up, without the help of the new inept Prime Minister.....and Europe is going down the gurglar. Seems like a lot of wholesale money would be happy to park in Australian mortgages with the resouce boom backing the economy.
Where are Aussie banks sourcing money from these days? Japan, Middle East, China, US, Euro?
Word has been the Japanese carry trade is drying up, without the help of the new inept Prime Minister.....and Europe is going down the gurglar. Seems like a lot of wholesale money would be happy to park in Australian mortgages with the resouce boom backing the economy.
that not how it works..you wanted a 5 years fixed loan..what banks do is
they throw that money to the market and said I want XXX for 5 years
what do you guys want to charge me. Dealers come back with 8.0%
including his margin... banks than takes 8% and include its margin then pass it on to you the borrower as 9% etc.. I just pick a random number what essential how it works.
so interest rate goes up to 20% ? so what bank still get their 1% margin and they pay their dealers 8% ... so dealers and under-writer will miss out but not banks
beautiful stuff inst it
yeah i think that's right... i think what they do is enter into a swap and add on the margin...
so everything is hedged out with certainty for them. only thing i don't understand is why the margin is thinner on fixed rate products...
How do you know it's thinner?
