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There's not much in it for the 1, 2 and 3 year rates right now. Hence thinking the 3 year is looking good. I'm a bit risk averse and like certainty for longer periods of time.
That works - you need to understand your risk tolerance.
Everyone is different!
For the past 5 years, every time I fix long term, ie 2 years max, I have always lost money!
So I'm going to stick with 6 months and 1 year rates from now on.
My friendly mortgage broker privately told me that MBs usually recommend 2 years plus rates because their clients will not change banks during the 2 years, and they get maximum brokerage from the banks. If their clients move banks before the 2 year is up, a % of brokerage (the longer the stay the less % claw back) will be clawed back from the bank! Hence the brokers usually recommend longer rates!
Banks like longer terms too - they lock customers in!
Which was my point - they are pushing 3 years for a reason and it isn't to do you a service.
Yeah that's right.
I figured that banks hire all those economists and assurers (whatever they call them) to predict interest rates, it would be pretty hard to predict the rates yourself and try to beat them.
So short term (whatever is lowest) will do the trick.
Not enough? I've got an offer for $5,000 cash bonus which I thought was a good deal, very good.
I'm about to borrow $195k and $205k for two rentals. This will be 100% finance. We have our own home - so we'll have just over 70% LVR when this is done. The bank is offering $2015 cash. Haven't discussed a rate yet. The promotion says it's for 'new mortgages' but the mortgage guy (bank employee) says "it's not for each flat you buy" but that he is sure he can get more for me. So, more than $2000, but not as much as $4000. Is $2000 about right for that level of borrowing - ~$200k? Should I be demanding $2000 for each mortgage?
As one of the loans is for under $200k that might reduce their offer a little, but I'd certainly push for $4k on $400k total borrowings. Even at 5% interest they're making $4k back in less than 3 months.
As an aside, make sure if you're leveraging up your private house significantly that you can survive if there's a downturn. It's one thing to lose your entire investment portfolio, but another entirely to lose your home.
And see an accountant for structuring if you've still got any private debt on the place.
1 year 5.11%
18 months 5.20%
2 years 5.26%
3 years 5.49%
Cash contribution $5,000
700 k loan from memory
Offer made about a week ago
Awaiting other banks
Looking at 2 years, since negotiating position will be reduced if need to renew/refinance within that, as will not want to repay cash contribution through going to another bank
Normally in these economic times I prefer shorter as the upside seems quite contained in the medium term.
hands up who feels comfortable with interest only loans after reading this?
But it is a major medium term concern because there's no question in my mind at some stage,
and I don't know when,
the property market will come back.
And it will come back 10, 15, 20 or even 25% and that will have a really devastating impact upon the New Zealand economy because of the high level of debt.
Will it be this year? Probably not, but it could be.
Will it be next year? I'm not sure.
It could be two or three years time but it will happen at some stage.
...........
But Stephens is far less bearish than Gaynor, saying Westpac's forecasts indicate a possible 5 per cent adjustment by 2018.
.............
"There's a bit of a myth that house prices tend to go sideways and that's just not true.
I thought I was smart 18 months ago fixing quite a bit for 5 years at 5.75%, 5.85%, 6.1% and 6.4%.
But in hindsight did not pick it, but then as Tony A says, no one can pick it.
But it helped me sleep at night and I knew I would sleep well for 5 years.
Interest rates going down, unexpectedly, well as a property investor its not something you would complain about.
And I still had significant amonts floating, so could put that down into short term fix's.
But we are in very interesting times, who would pick both Milk Powder and Oily falling 50%.
I have just explained to my dad the bad news on his Term Deposits, as last years I was saying that rates for him might be on the rise this year
Which brings me to another point, low rates, just pushed funds into shares and housing.
So its a double whammy for property investors, at the moment.
But, you have to admit, its a bubble for both shares and property, when money coming into these area's from investors and world wide QE, only comes in and pushes prices up, just because it has nowhere else to go.
Especially shares, where values boom while the companies themselves are just plodding along in an uncertain world.
When interest rates, do eventually go up, and no one knows when that is, both property and share's are going to be in for some kind of an adjustment.
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