All Topics / Finance / Fixed rate or variable on PPOR?

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  • Profile photo of Mike SmithMike Smith
    Participant
    @mike-smith
    Join Date: 2010
    Post Count: 10
    January 11, 2011 - 11:46 am

    Hi everyone,

    My partner and I are just about to build our PPOR (our first house). As far as interest goes, is it better to be on a variable loan or a fixed rate? Or a combination?

    Or is it truly ‘luck of the draw’ in that, well, no one really knows?

    Thanks in advance.

    Profile photo of ducksterduckster
    Participant
    @duckster
    Join Date: 2004
    Post Count: 1,674
    January 12, 2011 - 10:02 pm

    No one wants to predict how future interest rates are trending and if they advised someone incorrectly then they could be liable.

    If you fix your rate and lost employment and had to break the loan the break costs can be large.

    Are you likely to be able to make extra repayments ? If yes then this is when a split combination loan allows you to make extra repayments on the small variable part of the loan.

    Usually for investors it helps them fixing the loan in that costs of interest are fixed.

    There is a risk involved with fixing a loan if interest rates go down and you get stuck on a higher interest rate you fixed earlier.
    You need to consider if you can cope with this possible future situation and if you are able to tolerate the risk.

    Or is it truly 'luck of the draw' in that, well, no one really knows?
    With the current floods in QLD this will have an effect our economy.
    But how this will effect interest rates in the future I do not really know but
    Reading the business pages of the newspapers to see what experts are predicting as far as interest rates in the future might give you an idea how they might be affected. The rebuilding cost is estimated at 13 billion plus. Mining in QLD is affected, Food production is destroyed and exports have been stopped or delayed..
     It is not a perfect and guarantee method of predicting future interest rate events but it may help you to decide which way to go.
     

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024
    January 13, 2011 - 5:42 pm

    Hi Duckster

    On the floods wondered how you were coping in your part of town.

    I am in the UK on holiday and understand that Chapel Hill is ok albeiit a little damp.
    Had an email from one of our property managers to say that of my IP's are ok in Taringa / Toowong although a couple of the houses are flooded.

    Not sure whether i really want to see what  i come back to at the end of Jan.

    Cheers

    Yours in Finance 

    Richard Taylor | Australia's leading private lender

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