Hi everyone,
As a new investor on the scene I am a bit unsure about interest rates on loans. Is it best to have a variable rate or a fixed rate for a loan taken out between 20 to 30 years. There seems to be a bit of talk lately over where interest rates are going.
Thanks,
Ian
Do a search and you will find a plethora of information on this subject, for what its worth
if I was buying something now I would have variable.BC
Bc,
I agree. There seems to be some information overload on interest rates. For what it is worth, what I have done over the years is stay on the variable, as interest rates seem to be lower longer than they are up especially in an election year. I have friends who chop and change, it makes me giddy.
Spider
Pay now play later
My investment clients generally seek variable loans with the exception of a period late last year when fixed rates appeared cheap – and looking back they were. Today they are still mostly after variable.
Those that do seek fixed generally do so as they are willing to pay a premium for the certainty of a fixed rate. Only you know what that is worth to you!
Cheers,
Simon Macks
Mortgage Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Hi,
Some loan stats I got recently which show whats happened recently:
Average over 2003 – 9% of all loans were fixed
December 2003 – 15% of all loans were fixedI was surprised that fixed loans are such a small portion of the total, but it’s consistent with my client base’s activities. Even though it appears there was a bit of a panic in December after our first rate rise, personally I think it was driven up by people who’d been thinking about refinancing to capitalise on property value rises and the media’s rapid turn around that property was about to burst and rates were going to skyrocket prompted these people to finally act and refinance plus lock into a relatively cheap fixed rate so that they minimised surprises in the future on their higher debt levels. Not a bad strategy if servicing is tight that’s for sure, although personally I always stick to variable.
Another stat which is still getting mulled over is that first home owners dropped from an average of around 22% of property purchases to around 13% late last year. Again I tend to disagree with the hype and think this is due less to affordability of the deposit and repayments and more because a) there were probably elevated rates of FHO’s getting into the market the previous 3 years while the FHOG was on offer, and b) the media focus on the bubble bursting making parents more reluctant to encourage and assist their children to buy their first home incase the doomsdayers are right. Again only time will tell … here’s hoping they’re wrong!
Whether you go fixed or variable, always always always have a plan for:
when to buy,
when to hold, and
when to sell…. Kenny Rogers springs to mind!
Happy investing!
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Mel
[email protected]
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