Lock it in, Eddie?

[BayView]

Just had another get together with the MB, and I asked him the question about when to lock in rates.

Last time I asked him this was about 2 months ago, and then he said wait until about May '09.

Tonight he said as much, but added that the expected recovery was not going to be this year, so no hurry to go locking in rates any time soon.

Sounds to me like the goalposts have been moved out to nearer the end of the year.

 

[Nathan]

Im hearing ya joy from here in syd

im not scared to hold out, i see that we will have a stand off with fixed rates at 6% level with the occasional 4.99% special offer, that is when i will most likely fix... with my lenders im with of course

 

[twhurl]

I dont think there is a rush just yet

 

[Ms Jade]

My first thought is that your MB is a brave man and/or has the economic crystal ball we're all looking for. JK. Really, I'm surprised that any MB would tell you what future month to lock in rates. IMO the gloom isn't going to end any time soon so variable will probably stay low....
The problem I have with fixed rates is the sheer uncertainty of raising long-term funds in the wholesale market, the prices of which seem to be all over the place. I don't know whether the usual nexus between variable & fixed will play out over the next 12 mths. If the liquidity situation gets worse I just worry that we may end up with 4% variable rates and 5 yr rates a lot higher simply because of what the banks have to pay for that parcel of money. That may mean fixing sooner is a good idea.

 

[StuartW]

I agree. I don't disagree with the MB - its very possible that later this year we'll see some lower fixed rates. However, 5 year rates haven't changed for about 3 to 4 months. In fact, BankWest had the lowest rate of 6.19% but has recently increased it to 6.49% (from memory). This concerns me as it moving the wrong way.

I am starting to think that locking in a small portion of your debt at current 5 year rates might hedge your bets.

 

[Bradsdad]

My first thought is that your MB is a brave man and/or has the economic crystal ball we're all looking for. JK. Really, I'm surprised that any MB would tell you what future month to lock in rates. IMO the gloom isn't going to end any time soon so variable will probably stay low....
The problem I have with fixed rates is the sheer uncertainty of raising long-term funds in the wholesale market, the prices of which seem to be all over the place. I don't know whether the usual nexus between variable & fixed will play out over the next 12 mths. If the liquidity situation gets worse I just worry that we may end up with 4% variable rates and 5 yr rates a lot higher simply because of what the banks have to pay for that parcel of money. That may mean fixing sooner is a good idea.

My thoughts exactly. I for one would never advise a client to fix or not to fix. I see my role as to educate on te pros and cons and leave the decision to the client.
Should fixed rates jump or drop and advice to fix/not to fix was given, I would leave myself open to all sorts of trouble and maybe lighter in the pocket for the experience. Once I find that chrystal ball things may change .
Alas, I don't think anyone on the forum has such a ball otherwise surely they would have let us all know 2 years ago about the current financial crisis.


Regards
Steve

 

[keithj]

Tonight he said as much, but added that the expected recovery was not going to be this year, so no hurry to go locking in rates any time soon.

The big IF is what risk premium will lenders want for lending above the risk free govt bond rate over the next few months.

If pension funds and other money funds feel that they want a higher margin above the risk free rate then fixed rates will go up regardless of what the RBA does to var rates.

ATM, the big4 banks are raising money O/S, but the O/S lenders are currently demanding a relatively high premium. Although the current economic situation is a fair bit worse than 2002/3, fixed rates are still higher than back then.

I too am surprised your MB can see the future so clearly.

 

[BayView]

I too am surprised your MB can see the future so clearly.

Fair go.

As always; it's a prediction based on whatever experience the person has, and other factors at hand.

Use the info as you see fit.

As a qualifier; he has over 20 years experience with CBA in comm lending, so he may have a bit of an idea I hope.

 

[BayView]

My first thought is that your MB is a brave man and/or has the economic crystal ball we're all looking for. JK. Really, I'm surprised that any MB would tell you what future month to lock in rates. IMO the gloom isn't going to end any time soon so variable will probably stay low....

Jesus H.

He didn't tell me which month to lock them in; just a general timeframe for when it might be better to consider it.

In other words; not now.

 

[boomtown]

Marc don't let the comments from the other members bother you - we are all consenting adults here and know very well no one can predict the future. But feedback from like minded professionals and investors is invaluable.

 

[Jamie_D]

The economists are factoring in 2 more rate cuts over next few months...

March 75pt cut and April 50pt cut on average depending on global economic conditions over the next 2 months....difficult to see beyond this period though

These guys should know so I'd also wait

 

[StuartW]

My thoughts exactly. I for one would never advise a client to fix or not to fix. I see my role as to educate on te pros and cons and leave the decision to the client.
Should fixed rates jump or drop and advice to fix/not to fix was given, I would leave myself open to all sorts of trouble and maybe lighter in the pocket for the experience. Once I find that chrystal ball things may change .
Alas, I don't think anyone on the forum has such a ball otherwise surely they would have let us all know 2 years ago about the current financial crisis.


Regards
Steve

I would disagree with you Steve. I think a MB should provide some guidance and advice. Of course, all the usual disclaimers apply and common sense tells us no one can forecast these things so you shouldn't open yourself up to any legal issues. It is uncomfortable to recommend a client to fix or not (because you don't want to be wrong) but it’s part of the role of a MB in my opinion.

 

[Perth Investor]

Jamie

The problem I have is that the last 200 odd basis points in cuts has had next to no impact on the fixed rates. I'm not sure what the next 150 points will have...

I'd much rather 6.2% for 5 years, than 4% for 1 year...

Noel

 

[Hoffy]

I would disagree with you Steve. I think a MB should provide some guidance and advice. Of course, all the usual disclaimers apply and common sense tells us no one can forecast these things so you shouldn't open yourself up to any legal issues. It is uncomfortable to recommend a client to fix or not (because you don't want to be wrong) but it’s part of the role of a MB in my opinion.

I don't go to a broker for financial advice, which is what advising on interest rates is, I go to them to facilitate a loan. Alarm bells would go off for me as a client if they provided financial advice.

 

[boomtown]

Oh cmon Hoffy as if you don't say "so what are your thoughts" even if its just passing conversation. I certainly ignore just about everything that my MB says but that doesn't mean I don't ask.

 

[Bradsdad]

I would disagree with you Steve. I think a MB should provide some guidance and advice. Of course, all the usual disclaimers apply and common sense tells us no one can forecast these things so you shouldn't open yourself up to any legal issues. It is uncomfortable to recommend a client to fix or not (because you don't want to be wrong) but it’s part of the role of a MB in my opinion.

No problem with anyone disagreeing with me Stuart. I have no problems letting a client knowing what I have done with my own loans (adding that it may prove wrong). I however would recommend that a client not fix in as I believe rates will fall further or for that matter advise to fix as rates "will" go up. Not only is this something I'm uncomfortable with but as far as I'm aware it's not permissable for a MB to do so. Discussing pros & cons is one thing but once you add all sorts of disclaimers to recomendations are they really a recomendation?
I'd be very interested what other MB's on here think in regards to this

 

[Hoffy]

Oh cmon Hoffy as if you don't say "so what are your thoughts" even if its just passing conversation. I certainly ignore just about everything that my MB says but that doesn't mean I don't ask.

I was responding to Stuart who feels that providing "advice" and "recommendations" on interest rates is part of his role as a MB. I feel that is grossly over stepping the role of a MB and it would cause me to cease dealing with one if that was part of his proposition to me.

Sure I talk about rates with the MB, but I do as well with a cabbie or the bloke that cuts my hair.

 

[Token Funder]

I was responding to Stuart who feels that providing "advice" and "recommendations" on interest rates is part of his role as a MB. I feel that is grossly over stepping the role of a MB and it would cause me to cease dealing with one if that was part of his proposition to me.

Sure I talk about rates with the MB, but I do as well with a cabbie or the bloke that cuts my hair.

The whole problem with an unprecedent disruption in the global capital markets is that, you know, it's unprecedented. It is very difficult to predict rates to the same degree of certainty one might have been confident to do in the past.

Some of our guys are seeing biggish increases over the next few years as inflation comes to the party thanks to the printing presses in the various sovereign banks going in to overdrive.

Others see the recession as so long and so deep that rates will have to remain low, Japan style, for ages.

As always, fixed rates for predictability, variable for value over the long term.

 

[StuartW]

I was responding to Stuart who feels that providing "advice" and "recommendations" on interest rates is part of his role as a MB. I feel that is grossly over stepping the role of a MB and it would cause me to cease dealing with one if that was part of his proposition to me.

Sure I talk about rates with the MB, but I do as well with a cabbie or the bloke that cuts my hair.

Your call. If all you want a MB to do is fill out an application form for you then there are plenty of them out there that will suit your needs. Some MB might be well placed and well qualified to comment on interest rate matters, loan structure, risk management, etc. Do you realise some of us have qualifications and heaps of experience? Most financial planners wouldn't know anything about interest rates. If you don’t want advice, no one’s going to force you to listen.

 

[Hoffy]

Your call. If all you want a MB to do is fill out an application form for you then there are plenty of them out there that will suit your needs. Some MB might be well placed and well qualified to comment on interest rate matters, loan structure, risk management, etc. Do you realise some of us have qualifications and heaps of experience? Most financial planners wouldn't know anything about interest rates. If you don’t want advice, no one’s going to force you to listen.

So as a Mortgage Broker, are you licensed to provide financial advice?