New Loan in Nov 09 - Fixed, Variable or Split?

If you got a new loan in Nov 09, would you go Variable, Fixed or Split?

  • Variable

    Votes: 43 89.6%
  • Fixed

    Votes: 2 4.2%
  • Split

    Votes: 3 6.3%

  • Total voters
    48
  • Poll closed .
Hi Everyone,

My thread http://www.somersoft.com/forums/showthread.php?t=55147 proved to be quite popular in terms of polling and comments.

I ended up going variable myself in September. The comments/polling was influential on my decision.

There are still people polling in my original thread. As time goes by however, the results will not be as relevant as it contains the results from the past months. So I thought that I'd start up a new poll at the end of each month to gauge current thinking and sentiment towards financing choices.

Hope this will help others like it helped me.

Cheers.
 
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I will not advise a client to fix / or not fix, it is up to their personal views.

A quick question for those who voted fixed, is it because you think variable rates will rise quickly, or is it a personal preference to have certainty of the repayments ?
 
Here is a exceprt from my Sept newsletter - I had a financial planner crunch some numbers ( prior to last 2 rate rises) so data a little old but still interesting, to put it in perspective th Westpac professional 3yr fixed is now 7.39% and 5yr fixed 7.74%

To fix or not to fix…that is the question

Fixing interest rates can be a vexing dilemma at any time, but never more so than now. Katrina Gay from Nicholson Financial Planning has put a lot of time and effort into working through this complex question and I’d like to give you the benefit of her expertise:

Katrina says: “I have started to received quite a few queries from clients about whether to fix their interest rates. There is no doubt that interest rates will go up in future, but this doesn't necessarily mean you will be better off fixing your rates.

As many of my clients have Westpac professional package loans, I have used the current Westpac fixed rates in the examples below.

The current Westpac three year fixed professional pack rate is 6.79% pa. If you were to try and beat the variable rate by fixing now at this rate, you would have to believe that the average interest rate over the course of the three year period is likely to be higher than 6.79%. If, for example, we use a steady, straight line interest rate increase, then to break even with fixing at this rate, you would have to see discounted variable rates rise from 5.11% (current) as
follows:

- to 6.21% by Aug 2010
- to 7.31% by Aug 2011
- to 8.41% by Aug 2012

So in order to profit from fixing your rate for three years, you would need rates to rise by an average of 5 lots of 0.25% each year over that time.

Using the current Westpac five year fixed professional pack rate of 7.44% pa, and steady, straight line interest rate increases, then to break even with fixing at this rate, you would have to see discounted variable rates rise from 5.11% (current) as follows:

- to 6.06% by Aug 2010
- to 7.01% by Aug 2011
- to 7.96% by Aug 2012
- to 8.91% by Aug 2013
- to 9.86% by Aug 2013

So in order to profit from fixing your rate for five years, you would need rates to rise by an average of 4 lots of 0.25% each year over that time.

If you think that it is highly probable that rates will be higher than the figures above at those points in time, then you have a good argument for fixing. But, as with the share market, nothing is certain, so I personally prefer to keep all my loans variable. Looking historically, it is more common for people to lose rather than win by fixing their rates."

Thought it might be interesting for the debate. Obviously it is up to the individual to decide what fits their circumstances and risk profile.

Hope this helps
Jane
 
i think the boat has been missed for fixing in this cycle (having already fixed most of mine for around 5% back in march/april) so have voted variable.

however - if a property was positive cashflow for more than the fixed rate, for sanf i would seriously consider fixed for 3 years.
 
I voted variable as the ship has sailed for fixed rates...last chance was Aug 2009.

Most of mine were fixed in April and August 2009.....the last one I fixed in Sept. 2009 but that was only for 1 year at 5.59%.

Most of my rates are fixed for 2-3 years....so they come off in 2011, 2012. I suspect interest rates would have stabilised by then....even if they do not rent should cover most of my shortfall as I am CF+ to the time of $900pw in CF+. My gross rents are expected to go up by about $150-200pw each year so that should also provide some additional risk management!

This has left me serviceability to pick up more property in 2010....
 
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