Fixing rates - managing risk..the time has come

S

sash

Hi All,

I have been doing a bit of research whilst looking for properties.

I have noted the following in the last month:

1. Confidence is now flowing thorughout the economy. People are now out bidding each other again at auctions. Business are now looking to hire. The US unemployment actually dropped!:eek:

2. I contacted the agents regarding a few deals this weekend....on the calls I got back most have sold or are under offer.:eek:

3. The RBA and the govt. are preparing us for rates rises!:eek:

I have a sneaking suspicion that we will see rates head up around Oct./Nov. if this renewed confidence continues.

As a resutl I have fixed my rates....some on this forum will think I am silly...but I have seen this before.

The govt. & RBA will act decisively to contain inflation....so plan for 2% increase that the RBA has mapped out over the next 2 years.

I believe it will come sooner than most here think!;)

Would love to hear what others think...
 
Sash


I too believe rates will start rising and agree fixing IR is the way to go for many to risk manage repayments.

I am staying with I/O variable rate offset accounts, this way I can minimise any tax payable on savings by having in offset account, interest repayments are reduced & reduce more as monthly rent goes into accounts.

Off course IR payments will go up with IR increases.

5.11% per 100K = $5,110

5.5 % per say 98K = $5115.6

Of course it doesn't work out if you can't save!

6% per say 93K = $5580

6% per 100K = $6,000

Hopefully as rates go up rent/wages go up too and the amount able to be saved increases.


Regards
Sheryn
 
i am worried that rates have been fixed so high you're pating a premium for - well, nothing.

likely CG between then and now would have to compensate for the inflated holding prices.

maybe i'll fix 50% of my holdings.
 
I agree BC, the best time to fix was a few months ago. The window was pretty short.

The premium now has to be paid, although its not too big right now.

I usually stick to variable as i think the overall average for my loans over the years is in my favor.

Blue Card! said:
i am worried that rates have been fixed so high you're paying a premium for - well, nothing.

likely CG between then and now would have to compensate for the inflated holding prices.

maybe i'll fix 50% of my holdings.
Click to expand...
 
I have fixed most of my rates as per below:

1. 226K @ 5.28% for 2 years
2. 241K @ 5.79% for 2 years.
3. 149K @ 5.59% for 3 years
4. 168K @ 5.74% for 2 years

I have the following fixed expiring in mid 2010 at:

1. 146K @ 6.95%
2. 117k @ 7.45% - looking to break and fix for 3 years.

The I only have 2 on variable rates....but they have large 100% offset balances. ;)

The_Bludger said:
What did you lock in at Sash? Did you lock it all in or just half?
Click to expand...
 
I will stay variable at these rates.

I fixed 1 few months ago @ 5.19, but feel high 6's is too much of a premium of a variable of 4.9
 
From where I sit....my personal opinion is that we will be more than 6% by June 2010....the premium can rapidly disappear. Whilst i agree that anything more than the 3 years rates are far too expensive! By end of 2010 early 2011 we may see rates with a 7 in front....that is only less than 18 months away!

I am comfortable that I will hit the rates I fixed at within the next 6 months.....i.e. after 2-3 rate rises. Which will bring the cheapest variable rates to about 5.6-5.9%

Just my feeling.....being an old dog that has seen this before.....;)

The confidence in the economy and the turn has been reported in the papers for over 2 months....assuming it only gets better we will see a rate rise as early as Sept with a second one in Nov/Dec. 2009.....that will be just a shot across the bow...

The RBA will probably only do 0.25%....but if the economy grows even faster we may see the odd 0.5% increases to take the steam out! Particularly given that people will not react till they see a 6 in front of the rates!

All this can happen in 6 months....just like the rapid rate increase from Oct. 2007 to April 2008. The there was about a 4-6 month pause before rates started coming down again.

I believe rates last dropped in March...so if you fact 6 months in....Sept./Oct. 2009 looks like when rates might edge up.

I guess this all depends on what your circumstances are and what you intend to do in the future. What I am trying to do is to manage my $1m+ in loans...whilst rapidly continuing to gear in a rising market....a lot more tricky than it looks.

If you are caught with higher rates....this will also impact on your ability to borrow further funds! So covering both my bases....before my serviceability for full doc loans dries up!:p



Blue Card! said:
agreed - you pay 2% more NOW for values to remain under 6% for 2 years...?
Click to expand...
 
sash said:
cut

The confidence in the economy and the turn has been reported in the papers for over 2 months....assuming it only gets better we will see a rate rise as early as Sept with a second one in Nov/Dec. 2009.....that will be just a shot across the bow...

Cut
Click to expand...

Chance of a rate cut in September is zero.

That's 3 weeks away. There is no way RB Governor Steven's from last week were preparing us for a rate rise in 4 weeks time.

November at the absolute earliest, and I think Bill Evan's probably has it closer being Feb next year...
 
It is an outside chance.....but a lot of things could change in 3 weeks in the current environment....as always time will tell.....

As for Bill Evans.....no one knows.....but if I was betting man...I would bet on a IR increase this side of Xmas!

I am lookin at the numbers and newspapers reports....they are so positive now that this is going to influence consumer sentiments.

Hysterical as it maybe...newspapers are now reporting people are fighting over 800k-1.2m properties in Sydney. The low end market is like a episode of survivor to land a property to buy!

Perth Investor said:
Chance of a rate cut in September is zero.

That's 3 weeks away. There is no way RB Governor Steven's from last week were preparing us for a rate rise in 4 weeks time.

November at the absolute earliest, and I think Bill Evan's probably has it closer being Feb next year...
Click to expand...
 
yes i agree ! with BC again that the premium for the safty net whilst fixing rates is excuse the pun, over rated, ! if the rates rise it may be in .2 incriments , so perhaps, we won't notice it that much, i hope i can move this home of mine if the rates are at 9%:eek: if the econ needs cooling down and some one has the $$$ to buy this place,
 
I like that we're talking about rates rising (and with it a return to economic growth), but my opinion, for that is is worth, I think if you've not fixed by now you've already missed the boat.

My immediate outlook is that there will be a rate rise this year - and it may not be courtesy of the RBA.
 
Morgs said:
I think if you've not fixed by now you've already missed the boat.
Click to expand...

Too right - especially if you are with Westpac or CBA.
CBA just upped their fixed rates horrifically last night.

2 year - 6.54%
3 year - 7.14%
4 year - 7.59%
5 year - 7.79%

Take off 0.15% for being on the wealth package.


Makes me REALLY happy that I locked in back in June:
PPOR - 6.44% 4 years
IP2 - 6.04% 3 years.

The funny thing is, many of my friends are asking "how did you know to lock then?"....... i thought it was obvious?
 
Another indication is that banks are starting to offer up to around 7% pa on 5 year term deposits (eg. BankWest and RaboPlus have 7% for 5 years).

If they don't mind paying 7% pa now, they must be expecting rates to be higher than that in 5 years time to make up for it.

GP
 
Yep......I locked in with CBA at 5.28% and 5.79% for 2 years at CBA...

My personal believe is that we will see a 6 in front by early next year.

Also.....based on previous experience when first home buyers rush and based on suppy....you will see that rent increases will also slow down.

People who think that rents can increase like the last 2 years might be in for a surprise. Already in Sydney's lower North shore rents have come off about $50-70 dollars on the bread and butter 2 brm units which used to rent for $450-$520.

Witzl said:
Too right - especially if you are with Westpac or CBA.
CBA just upped their fixed rates horrifically last night.

2 year - 6.54%
3 year - 7.14%
4 year - 7.59%
5 year - 7.79%

Take off 0.15% for being on the wealth package.


Makes me REALLY happy that I locked in back in June:
PPOR - 6.44% 4 years
IP2 - 6.04% 3 years.

The funny thing is, many of my friends are asking "how did you know to lock then?"....... i thought it was obvious?
Click to expand...
 
Witzl said:
Makes me REALLY happy that I locked in back in June:
PPOR - 6.44% 4 years
IP2 - 6.04% 3 years.

The funny thing is, many of my friends are asking "how did you know to lock then?"....... i thought it was obvious?
Click to expand...

Beat you, locked in 3yrs with CBA at 5.6% :p

Know what you mean though. Keeping a general eye on economy and some light reading - not too hard to work out when the rates had bottomed IMO.
 
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