Interest Rates

Viewing 7 posts - 1 through 7 (of 7 total)

Dram
Member
@dram
Join Date: 2003
Post Count: 82
June 14, 2003 - 1:46 pm
Evening All.
Saw something on the news tonight regarding official interest rates falling. I believe the story said economists expected interest rates to fall below 5% over the next few years.
Couldn’t find a reference to it online though. Anyone else see it?
westan
Member
@westan
Join Date: 2002
Post Count: 1,950
June 14, 2003 - 3:11 pm
hi darwin
didn’t see the story.
while i agree with those forecasters, that the next interest rates change will be down. i don’t get too carried away with what economists say. they change their mind every week it seems. these are the same guys that until recently have be saying the next rate change would be up. Most of them have been saying this for years. just look at the world you don’t have to be to smart to see the next rate is down. the us and Japanese economies are serious trouble. Japanese cash rate is virtually 0% the US are about 1.5% while we are 4.5%. Look up how many economists make it into BRW top 500 wealthist Aust. Not one,
as you can see i don’t have a high opinion of a lot of economists
westan
Stuart Wemyss
Member
@stuart-wemyss
Join Date: 2003
Post Count: 598
June 15, 2003 - 4:47 am
Hi Darwin
You might what to have a read of this article that was in The Age today… see http://www.theage.com.au/
Interesting question where rates are going to go. It’s hard to pick the top and bottom of a rates cycle. Lenders are still dropping their fixed rates so perhaps now is not the right time to fix. You may also like to read my article at http://www.prosolution.com.au/ps_docs/prosolution_doc051503_151111.pdf
History shows that fixed rate borrowers are often financially worse off. Obviously this analysis ignores the emotional aspect of having certainty of repayments.
Anyway a bit of food for thought.
Cheers
Stu
Property & Finance News
at http://www.prosolution.com.au
Steve McKnight
Keymaster
@stevemcknight
Join Date: 2001
Post Count: 1,763
June 15, 2003 - 4:56 am
Hi,
Be happy if they fall, but be prepared when they rise.
This raises a bigger question of what is an appropriate loan mix of:
1. Interest only, and
2. P&I
and then:
A. Variable
B. Fixed
interest rates.
What do you think Stu?
Cheers,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.com
Success comes from doing things differently
Stuart Wemyss
Member
@stuart-wemyss
Join Date: 2003
Post Count: 598
June 15, 2003 - 11:50 pm
Hi Steve
Good question. The answer is that it depends on individual circumstances, strategies and objectives. However…
Why not go IO all the time? If you elect to repay IO your minimum repayments are equal to the monthly interest costs. However, you can always pay more (most IO products allow extra repayments without cost – but check with individual products). Therefore, you can make to equivalent to P&I repayments on a IO loan. The advantage of doing this is that if your cash flow get tight you can always go back to just repaying interest. Furthermore any principal repayments made on a IO loan are counted as “extra repayments” and can be redrawn at a later date (subject to redraw terms).
I’m just about to purchase my first cash flow positive property. I will take out a 100% variable loan. I will always go variable up until my borrowings are around $800 – $1 million. Then I’ll probably think of fixing a portion to manage my interest rate exposure. I have decided to do this on the basis that from a financial perspective you are probably always better off to go variable (the banks don’t offer fixed rates to be nice… they think they’ll make money out of you and normally they are right). However, a prudent investor should manage their risks based on exposure. I see fixed rates as buying interest rate insurance – I know I’m paying more but I do so to insure my risks.
But variable versus fixed is a very personal thing and I don’t think there is a right or wrong so long as people understand that its more likely than less likely that fixed rates are going to cost them more (in financial terms).
I would love to hear other people’s views.
Cheers
Stu
Property & Finance News
at http://www.prosolution.com.au
DaveC
Member
@davec
Join Date: 2003
Post Count: 79
June 16, 2003 - 6:13 am
Hi There
An accountant friend of mine in the UK has suggested that the company he works for looks at the US futures market and US Government bond rates to get an indication of where interest rates may go in say the next two years.
Please don’t ask me how or why as I know nothing about the US futures market……….anyone have any other information?????
Take care
Dave []
spider_2
Member
@spider_2
Join Date: 2003
Post Count: 79
June 16, 2003 - 11:44 am
Hi Darwin,
Yes I heard it too and if you check out the front page of The Advertiser from Adelaide today, it has more info. You can go to http://www.theadvertiser.com.au to read the article.
cheers
[]