locking in rates
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Hi Tab,
I will be locking in rates for my long term holds as soon as they begin to rise again (rather than guessing where bottom is) which won't be anytime soon in my opinion. Great time for hunting for property with value add potential that is nearing CF neutral - CF+. eg existing house with subdivision or development potential.
Will decide on the term when the time comes as it will depend on my circumstances at the time.
Cheers, Ian
I will be locking in rates for my long term holds as soon as they begin to rise again (rather than guessing where bottom is) which won't be anytime soon in my opinion. Great time for hunting for property with value add potential that is nearing CF neutral - CF+. eg existing house with subdivision or development potential.
Will decide on the term when the time comes as it will depend on my circumstances at the time.
Cheers, Ian
Six months ago the consensus here was that rates were on the up, big time, and many fixed. (I'm just reading posts here)
So now the consensus view is that rates are heading down, big time! Are these the same forecasters?
In Australia there is always a rate penalty for fixing and we don't have the option the Yanks do of fixing for the duration of the loan. Personally I hate talking to banks and consider getting the data they need together is WORK!
The lazy investor part of me says to go with the flow. It's worked for me.
So now the consensus view is that rates are heading down, big time! Are these the same forecasters?
In Australia there is always a rate penalty for fixing and we don't have the option the Yanks do of fixing for the duration of the loan. Personally I hate talking to banks and consider getting the data they need together is WORK!
The lazy investor part of me says to go with the flow. It's worked for me.
My father is big on pointing out that the bank employs a whole staff of people who work out what the fixed rates will be. So you'd expect them to have a fairly good idea what's coming up .. and then they price in a little extra to pay their wages.
So you're up against an army of people whose entire reason for existence is to make sure you don't win.
I'm not sure I agree with that, but there we go.
So you're up against an army of people whose entire reason for existence is to make sure you don't win.
I'm not sure I agree with that, but there we go.
***DISCLAIMER***
I am 40(ish), female ANDBlonde
BUT throughout my 24 odd years of buying and selling...I really DON"T CARE about interest rates. (lived through 7% and 18% mortgage rates)
When I apply for any loan... I FIRSTLY work out my serviceability based on 10% pa (gives me a good SANF) THEN work out how much I can afford ...(I have had many a broker TELL me that "but you can get soooo much more money than that") and just make payments based on 10%
I have never fixed rates except for my 1st ever PPOR which a "sales guy. bank jockey "convinced me to do.
has worked for me so far
I am 40(ish), female AND
Blonde BUT throughout my 24 odd years of buying and selling...I really DON"T CARE about interest rates. (lived through 7% and 18% mortgage rates)
When I apply for any loan... I FIRSTLY work out my serviceability based on 10% pa (gives me a good SANF) THEN work out how much I can afford ...(I have had many a broker TELL me that "but you can get soooo much more money than that") and just make payments based on 10%
I have never fixed rates except for my 1st ever PPOR which a "sales guy. bank jockey "convinced me to do.
has worked for me so far
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I guess I fluked it this time.
Had kept most of my mortages variable for many months now, as I had intended to hand over some of CBA's Mortages to whoever would lend me more money for another property.
Which is something to think about if you lock in, as it might be harder to play the banks !
John.
Had kept most of my mortages variable for many months now, as I had intended to hand over some of CBA's Mortages to whoever would lend me more money for another property.
Which is something to think about if you lock in, as it might be harder to play the banks !
John.
I would have fixed at the end of september when there was a wave of reduction, I was wrong and the RBA cut the rates quicker then I thought (and they don't give a **** of inflation and the AU$). Also Government and central banks pumping money in the systems seems working for banks that have plenty of money.
Having said that I still think rates in Australia can't stay and go low for long time. I would wait that all banks price in the mortgages fixed rates all these cuts and cheap funding costs and would fix by the end of the year.
Also interesting was the forecast from St George bank:
in their interest rates forecast they'll expect 4.25 rate from RBA for the last 3 quarters of 2009, while they'll expect the 3 years bond rate to rise from 4.05 to 4.95 in the last 3 quarters of 2009. That would also mean fixed mortgage rates will rise following the bonds despite the low cash rate. Wonder why they forecast the rise in bonds, what data they have to support that.
for my keepers i'll be locking in for as long as physically possible as soon as i believe they are at, or near, bottom.
i remember locking in last time around and having several on 5.99% while variable interest rates were going up to 7, 8 then 9%. was painful when they finally came off, but gave a bit of happy sanf for a while.
i remember locking in last time around and having several on 5.99% while variable interest rates were going up to 7, 8 then 9%. was painful when they finally came off, but gave a bit of happy sanf for a while.
Rates have a lot further to fall... 3.5% cash rate by March. Check the link below...
http://www.asx.com.au/data/trt/ib_expectation_curve_graph.pdf
This chart is remarkably accurate at predicting short term changes - i.e. one to three months away. You can pretty much guarantee that the chart will accurately reflect the direction of the following months RBA decision, if not necessarily the magnitude (since the RBA likes to surprise us with magnitude these days).
When the chart starts to tell me that rates are moving up, then I will think about locking in.
Ignore the fact that the chart suggests rates will be moving up again late next year. It is not accurate over that distance. I think that when rates do get to the bottom they will stay there for quite a long time. But do keep an eye on the 1-3 month outlook (the chart is updated daily).
When rates look like they will start to head up again, I'll be locking in for as long as possible (probably ten-fifteen years). I think it will be good idea to lock all my properties into a cashflow positive position - that way when we do have the crash, it won't matter if I lose some of the 'paper gains' from the forthcoming Sydney boom - the income will keep flowing in.
As I have written here before, I expect we will have a property crash around 2014-2015 when we will have over-built as part of the forthcoming construction-led property boom, and the baby-boomers all start to die off at around the same time.
Cheers,
Shadow.
http://www.asx.com.au/data/trt/ib_expectation_curve_graph.pdf
This chart is remarkably accurate at predicting short term changes - i.e. one to three months away. You can pretty much guarantee that the chart will accurately reflect the direction of the following months RBA decision, if not necessarily the magnitude (since the RBA likes to surprise us with magnitude these days).
When the chart starts to tell me that rates are moving up, then I will think about locking in.
Ignore the fact that the chart suggests rates will be moving up again late next year. It is not accurate over that distance. I think that when rates do get to the bottom they will stay there for quite a long time. But do keep an eye on the 1-3 month outlook (the chart is updated daily).
When rates look like they will start to head up again, I'll be locking in for as long as possible (probably ten-fifteen years). I think it will be good idea to lock all my properties into a cashflow positive position - that way when we do have the crash, it won't matter if I lose some of the 'paper gains' from the forthcoming Sydney boom - the income will keep flowing in.
As I have written here before, I expect we will have a property crash around 2014-2015 when we will have over-built as part of the forthcoming construction-led property boom, and the baby-boomers all start to die off at around the same time.
Cheers,
Shadow.
I agree with most of that, 10 to 15 year fixed is worth while at the right rate. I certainly wouldnt go near fixing now.
I think the construction and baby boomer crash might be located in patches rather than a blanket spread on the whole market. Just reinforces to me why I buy in areas which are densely populated and where people want to live in rather than have to live in.
Looks like CF+ might be coming back in fashion too.
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Fix rates preferred
I have always preferred fixing rates. Just gives me SANF and helps in managing the cashflow.
Cheers
I have always preferred fixing rates. Just gives me SANF and helps in managing the cashflow.
Cheers
I have always gone variable and see a few people who went fixed who really regret it now. Especially if you have to sell and the rates are now lower that your current fixed (could costs many $$$ that they may not have).
I can only justify fixing if the margin of downward movement potential is reduced significantly (i.e. rates at 5% or lower)
I can definitely see the cash flow advantages at certain times, but people need to understand that there is a risk in both loan types. So many people think fixing is risk free, but IMO it can be far worse in situations like we are in now.
I will go fixed when it is low (real low)
Thanks David, I had been planning to buy another IP this year, but having a baby a few weeks ago has changed our plans slightly!
The plan now is to buy a new bigger PPOR next year and sell our current PPOR to our trust and turn it into an IP.
So will probably buy again towards the middle of next year, and if interest rates look like they have bottomed by that stage than I may think about locking them in.
The great thing is with interest rates coming off so much we have really upgraded our expectations for the new PPOR - i.e. if interest rates halve we can afford double the house for the same locked in repayments! Yes, we're greedy capitalists!
Cheers,
Shadow.
Lazy. I had a baby last year and we just built an extra bedroom.
I can safely say it is not easy to haul yourself up a scaffold when you're big, fat and unbalanced.
God forbid we have any more kids, the only place to extend without actually making the house bigger is into the roof (not that there's really a problem with that, you could fit several dozen Sudanese refugees and several camels up in my roofspace)
I can safely say it is not easy to haul yourself up a scaffold when you're big, fat and unbalanced.
God forbid we have any more kids, the only place to extend without actually making the house bigger is into the roof
(not that there's really a problem with that, you could fit several dozen Sudanese refugees and several camels up in my roofspace)Yep, my free time has basically disappeared with the new arrival. For which I'm sure you guys on **** are eternally grateful!
I'm sure I'll come back some day. Maybe when the little one leaves home for uni or something. But then I guess the big crash will probably have happened by then. Oh well.Edit: Haha - I guess we're not allowed to mention the other forum at all. Well, you know where I'm referring to.
Can you see rents increasing or even holding at current levels if bank interest rates are sub 6%?
It will be a tricky balance at that point IMO, unemployment will be edging up, those with jobs will opt to buy rather than rent, prices will fall, supply may increase but questionable whether it can with falling prices. Migration, will slow down significantly as well I think.
For me the combo of rents where they are at least, and lower rates makes life a little easier but if vacancy rates rise and rents drop...we're back to hard times.
It will be a tricky balance at that point IMO, unemployment will be edging up, those with jobs will opt to buy rather than rent, prices will fall, supply may increase but questionable whether it can with falling prices. Migration, will slow down significantly as well I think.
For me the combo of rents where they are at least, and lower rates makes life a little easier but if vacancy rates rise and rents drop...we're back to hard times.
having been thru the 80's, 90's and early 00's i don't see rents dropping back. they may stagnate for a while but every other rent decrease period (that i have witnessed) has been caused by oversupply only - which is not a problem now.
rents dropped in sydney early 00's due to oversupply of units (now soaked up), melbourne dropped because of the oversupply at docklands (also now soaked up).
i think that rather than rents dropping you may end up with more sharing to met the rent - rather than a couple in a 2 bedroom place, there may be 2 couples etc.
rents dropped in sydney early 00's due to oversupply of units (now soaked up), melbourne dropped because of the oversupply at docklands (also now soaked up).
i think that rather than rents dropping you may end up with more sharing to met the rent - rather than a couple in a 2 bedroom place, there may be 2 couples etc.
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