Would you go fixed rate or variable at the moment???
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I just did a rough calculation. It seems going variable would be best and be still OK/break even if there were another 3 x 0.25% interest rate rises in the next 2 years. Roughly based on:
* about a 2 x 0.25% interest rate buffer due to the better rate
* plus another roughly 1 x 0.25% benefit by having the Offset Account, so if you have/need about $5k-$10k up your sleeve for personal expenses it can sit in the offset account against the loan (i.e. for a variable rate loan)
So overall variable seems a reasonable way forward.
* about a 2 x 0.25% interest rate buffer due to the better rate
* plus another roughly 1 x 0.25% benefit by having the Offset Account, so if you have/need about $5k-$10k up your sleeve for personal expenses it can sit in the offset account against the loan (i.e. for a variable rate loan)
So overall variable seems a reasonable way forward.
Fix for 3 years
We are guessing rates will rise again once or twice
Industry talk has always seemed to be that they are at their peak, but then they rise again and again
If rates do come down in a year or two fixing for 3 years may just put you into a better environment
Just guessing though
If the Economists, Banks and Mortgage Brokers cannot get it right what hope do we have
We are guessing rates will rise again once or twice
Industry talk has always seemed to be that they are at their peak, but then they rise again and again
If rates do come down in a year or two fixing for 3 years may just put you into a better environment
Just guessing though
If the Economists, Banks and Mortgage Brokers cannot get it right what hope do we have
I agree with yo yo, stay variable if you can afford another couple of rate rises. If not, fix a majority of your loan for 2 to 3 years, and leave some variable to work with your offset account.
Just heard in the news tonight that there may be interest rate cuts in 2009. The longest I would fix for at the moment is 1 year; anything longer than that is just speculating on interest rates.
Here's a useful link to get a warning on rate changes, the graphic with % probability is nice.
Though when you are stuck with a non bank lender that seems to do it's own raise every month that's another matter
Though when you are stuck with a non bank lender that seems to do it's own raise every month that's another matter
As a MB I cannot give advice on whether to fix or not but WASP makes some very valid points. We have different banks saying different things in regards to what will happen. Does the SNr economist with the bank who gets it right get a pay rise and the other the bullett? Probably not.
Industry talk will often play things down as it's in their best interests just like RE's talking full of confidence.
I know that I went to a seminar about 2 years ago and saw a presentation that showed that rates have been very cicular over the past 100 years here, in the USA & UK. The cicles tend to come aroundevery 11-12 years so if that's correct rates won't peak until around 2011/12. This doesn't mean the odd fall won't occur by then. Trends can always be bucked but I know I fixed a loan in late last year for 3 years which is the 1st time I've ever done so. I'm now well over 1% better off which isn't as much as a few of my client are at present who fixed earlier.
Whether fixing now will acheive the same results only time will tell but as has been mentioned, if it's a concern to the individual maybe a split (fixed/variable) maybe the option.
Please dont take offense at this, but i can never understand why people fix for such a short period. Either stay variable or fix for a decent period. The whole point of fixing is insurance. Honestly how much would fixing for two years help your situation if things didnt go as you expected.
For myself if i have the opportunity, i fix for 10yrs+. This gives me a high insurance buffer. No matter what happens to interest rates at year 11, my rent increases by that time will be able to handle it.
I'm still trying to figure out (in a few cases) if you have the cash why people dont prepay the interest in advance as it drops the rate by anohter .2 on top of the advertised rates (if not more).
Nothing wrong with splitting the loan were seeing a bit of that
Or going on an intro for a year and then evaluating before it comes off.
People seem to forget you can do an intro as another option then convert it to a .7% off on full doc stuff instead of having to always go for a pro-pack variable when looking at the options.
Bear in mind as well a bank will make variables look more attractive as they will make more $ out of the loan... and the advertising guy at the bank is not the economist or the person in treasury
Nothing wrong with splitting the loan were seeing a bit of that
Or going on an intro for a year and then evaluating before it comes off.
People seem to forget you can do an intro as another option then convert it to a .7% off on full doc stuff instead of having to always go for a pro-pack variable when looking at the options.
Bear in mind as well a bank will make variables look more attractive as they will make more $ out of the loan... and the advertising guy at the bank is not the economist or the person in treasury
