To Fix or not to Fix...
- Thread starter Lukey13
- Start date
3 years would be the most I would go, having said that I'm not fixing at all at the moment. I still think the banks know more than me and there is more chance that they will come out infront on fixed loans than us.
I too locked in 6.55% two years ago with another year left at that rate for my PPOR. There's no way I'm touching that one again until 2009.
I think I'll go ahead with the 5 year fixed at 8.34% for my recent IP purchase because I know I can afford that rate and that after the 5 years it'll be cash-flow neutral with a fair-whack of capital growth. I need security like that if my wife will be taking extended time off work within that time.
As Steve said, if your finances are getting tighter with the recent rises, and future rises are going to make things uncomfortable - lock them in.
If you fix, in the best case scenario you save some cash over the next 3yrs and your portfolio is safe. Worst case scenario, you end up paying more interest than you needed to, but your portfolio is still safe. Now look at the worst case scenario if you don't fix.
To me it's not a good risk/reward proposition - don't fix and I might save some cash if the rates go down after. If the rates continue to go up I risk losing an IP/'s (granted that's worst case). It's not an even scale, the possible consequences far outway saving a few thousand over 3/5yrs. But hey, that's just me!
If you fix, in the best case scenario you save some cash over the next 3yrs and your portfolio is safe. Worst case scenario, you end up paying more interest than you needed to, but your portfolio is still safe. Now look at the worst case scenario if you don't fix.
To me it's not a good risk/reward proposition - don't fix and I might save some cash if the rates go down after. If the rates continue to go up I risk losing an IP/'s (granted that's worst case). It's not an even scale, the possible consequences far outway saving a few thousand over 3/5yrs. But hey, that's just me!
Well said I think....
To me it's not a good risk/reward proposition - don't fix and I might save some cash if the rates go down after. If the rates continue to go up I risk losing an IP/'s (granted that's worst case). It's not an even scale, the possible consequences far outway saving a few thousand over 3/5yrs. But hey, that's just me!
I'm coming around to this train of thinking, I don't trust the rises and think we are likely near a significant top but the payoff if I'm right is uncertain and if I'm wrong then it could hurt a lot.
Comes back to the whole ignore the predictions and work out what is best for your strategy idea.
hmmmm. it is a probability game...
but agree with steve, if your spare debt service capacity is seriously tight, then you have to manage that risk.
however, I believe the RBA can't be so stupid as to ignore that cpi has recently been driven more by their previous rate rises, the cost of fuel, & the sub prime problem.
If the RBA keep moving rates up, they are just going to push inflation higher. Absolute madness on their part, or an ulterior motive to slow new demand for credit and property....
And my rationale for the above is within the quartetly cpi changes from sept07 to dec 07 (the latest figures).
The attached graph is from the abs website, and highlights that the 4 highest contributors to inflation during the last quarter were in order
1. Petrol
2. Loan Facilities
3. House Purchase
4. Rents
Stunning.....so inflation is basically being driven by :
- the POO (which Aussies have no control over no matter how much we tighten our belts)
- preceding interest rate rises
- the sub prime mess
So here we have evidence of the the cpi/rate rise positive feedback lagged loop I have talked about elsewhere....
Some economists note this, and have calculated that when the effects of previous rate rises and sub prime is stripped out of cpi calcs, cpi falls below 3% !!!!!!
So on this basis, one has to wonder what the deeper motivation for rate rises is...
And think the probability has to be on rates not going up much more...
but agree with steve, if your spare debt service capacity is seriously tight, then you have to manage that risk.
however, I believe the RBA can't be so stupid as to ignore that cpi has recently been driven more by their previous rate rises, the cost of fuel, & the sub prime problem.
If the RBA keep moving rates up, they are just going to push inflation higher. Absolute madness on their part, or an ulterior motive to slow new demand for credit and property....
And my rationale for the above is within the quartetly cpi changes from sept07 to dec 07 (the latest figures).
The attached graph is from the abs website, and highlights that the 4 highest contributors to inflation during the last quarter were in order
1. Petrol
2. Loan Facilities
3. House Purchase
4. Rents
Stunning.....so inflation is basically being driven by :
- the POO (which Aussies have no control over no matter how much we tighten our belts)
- preceding interest rate rises
- the sub prime mess
So here we have evidence of the the cpi/rate rise positive feedback lagged loop I have talked about elsewhere....
Some economists note this, and have calculated that when the effects of previous rate rises and sub prime is stripped out of cpi calcs, cpi falls below 3% !!!!!!
So on this basis, one has to wonder what the deeper motivation for rate rises is...
And think the probability has to be on rates not going up much more...
