Hi everyone
I'd like to hear some opinions/strategies for fixing loans.
I've spoken to clients in the past with term deposits, who worry about falling interest rates. A common risk-avoidance strategy that I've often advised is to spread the risk of interest rate movements by laddering - Having deposits maturing at different times, 6-12 months apart, so only a small portion of your investment is ever exposed to the 'current' interest rates.
Historically this has been good advice for borrowings also. While it's arguably not such a good move right now given how expensive 3-5 year rates are looking, I'm sure this will correct itself at some point in the future.
But this doesn't take into account the advantages of often substantial bank contributions for switching your lending. In order to hold the best bargaining position with a new bank or your current one, you ideally want all of your loans maturing at about the same time.
What do the experienced borrowers do? How do you reconcile this risk/reward tradeoff?
Anthony
I'd like to hear some opinions/strategies for fixing loans.
I've spoken to clients in the past with term deposits, who worry about falling interest rates. A common risk-avoidance strategy that I've often advised is to spread the risk of interest rate movements by laddering - Having deposits maturing at different times, 6-12 months apart, so only a small portion of your investment is ever exposed to the 'current' interest rates.
Historically this has been good advice for borrowings also. While it's arguably not such a good move right now given how expensive 3-5 year rates are looking, I'm sure this will correct itself at some point in the future.
But this doesn't take into account the advantages of often substantial bank contributions for switching your lending. In order to hold the best bargaining position with a new bank or your current one, you ideally want all of your loans maturing at about the same time.
What do the experienced borrowers do? How do you reconcile this risk/reward tradeoff?
Anthony
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