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Interest Rates

Discussion in 'Real Estate' started by Liverpool St, 25th Oct, 2007.

  1. Liverpool St

    Liverpool St Well-Known Member

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    I suppose my guess is as good as anyone, but here goes...I have a residential IO loan with Members Equity and their variable rate is 7.74percent as opposed to their fixed one year rate of 7.69percent. I am always wary of this when the banks have lower fixed rates than variable as I believe they are trying to entice investors to fix. Anyway, normally I would remain on the variable as it is only slightly lower than the variable, however, if rates go up in November by 25 points it will make some difference.

    What do people reckon? Should I fix for one year?

    Thanks

    Liverpool St
     
  2. MichaelWhyte

    MichaelWhyte Well-Known Member

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    Personally, yep.

    In fact, I reckon it will go 0.25 in November and then again early next year. So, you'll see half a percent in variable rate rises whilst you're on a fixed rate which is lower than the current variable. We're in a rising rate environment which is unlikely to change in the next 12 months.

    Fixing in that environment makes sense to me. But this is all just MHO.

    Cheers,
    Michael.
     
  3. Liverpool St

    Liverpool St Well-Known Member

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    Thanks Michael. Yeah, there is no downside unless I don't fix. I just had that election in the back of my mind, but the Reserve changes interest rates and not Mr. Howard

    L.S.
     
  4. DaveA

    DaveA Well-Known Member

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    cba have already put their fix rates in expectation of the rise next month. 3yr fixed has gone up 5 bps and >4 years went up 10 bps. Our variable is 7.62, 3 yr fixed is 7.69 and 5 yr is 7.74

    We paid the money for a rate lock and got our fixed at 7.64% for our new property. Just waiting for it to settle now...
     
  5. handyandy

    handyandy Well-Known Member

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    I went through this question back in June regarding a MF loan.

    http://www.invested.com.au/3/dif-required-make-int-advance-worthwhile-14425/

    In the end I did fix it for a year and am glad I did as we are certainly having/ going to have the int increases.

    I have been caught out previously where I fixed and rates went down but I don't think the current environment will create this situation.

    The other way you can be caught out is by not being able to reduce these loans when excess funds are available.Swings and roundabouts I guess :eek:

    Cheers
     
  6. AsxBroker

    AsxBroker Well-Known Member

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    Spot on Liverpool St.

    They do this for one reasons when the rate curve is normal.
    They use this as a marketing tool to get a bigger home loan book. ie, winning a bigger market share.

    Cheers,

    Dan
     
  7. Billv

    Billv Getting there

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    I am not fixing because I want flexibility.
    There is talk of interest rates going up 3 times or more but I don't believe it will happen.

    I am actually expecting the financial tsunami that Costello mentioned to hit the US, they will have to lower interest rates to combat the recession that's about to hit them and we will probably have to follow.

    There are already problems with the cost of petrol reaching record high levels. The Northern hemisphere US/Canada/Europe/Japan etc are about to have a cold winter but this time petrol will burn a hole in their pockets...:eek:

    When people don't have money to spend, they cut down on unnecessary things like their new plasmas or holidays, or that new car they were thinking of getting. If the US, Europe & Japan have even a mild recession everyone will be affected including Australia.

    So what do we do I hear you say.
    It's time to batten down the hatches and to hold on to your seats...:)
    Cheers
    Bill
     
    Last edited by a moderator: 28th Oct, 2007
  8. samaka

    samaka Well-Known Member

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    Or in my case, leave the money I was going to invest in my Bankwest account and go on a holiday overseas for 6 months! :p
     
  9. Billv

    Billv Getting there

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    Actually I wouldn't go on an expensive holiday just yet.
     
  10. samaka

    samaka Well-Known Member

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    Exchange rates? Backpacking probably doesn't count as expensive though.
     
  11. Billv

    Billv Getting there

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    True, our $ is very strong against many other currencies.
    Enjoy your holiday.:)
    Cheers
    Bill
     
  12. crc_error

    crc_error The Rule of 72

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    So why should this stop you from investing? Doesn't it mean you should invest in things people need? IE food, water, power, housing?
     
  13. Billv

    Billv Getting there

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    I could but I am thinking that it will be better to wait for 6 months or so, I could be one of those unfortunate ones who will be looking for work ...:eek:
    Cheers
    Bill