I think the world is moving towards a synchronised double dip recession – US, Europe, China, UK . . . . I think variable interest rates could possibly end up below 5% by July 11. I don’t need to write much else.
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Another rise – we may have a break from rises for a few months as retailer (especially of whitegoods and furniture) are having poor sales figures. But i believe that the rate rises will continue soon enough, barring an unexpected shock. I think this will lead to a fall in the interest rates of fixed loans, or will mean no increase in what is being offered for a while. I still think variable rates will go up another half a percent in the next four months. I have just jumped on betfair and managed to make a bet for a quarter percent rise at 1.85 to 1 odds. I am not 100% sure that there will be a rate rise – but am more than 75%, so my odds are OK IMO. This is because inflation has hit about 2.1% for the year just passed, according to the TD Securities/Melbourne Institute monthly inflation gauge. I think that the market will start to factor in more rate rises very quickly. So don’t sit on your hands if you want to be fixed. However if you plan to fix just to save money, my predictions suggest you will end up about square on a three year fixed. And behind for the rest. My guess is there is a 50% chance of no change, 45% chance of a 0.25% rate change, and 5% chance that it will go up half a percent. If you want to be fixed, then maybe sooner is better than later, as I believe increases in fixed rates will flow through within the next two weeks. If you make extra repayments on your loan, redraw allows you to pull all or some of those extra repayments out again. If you have not made any extra repayments, you will not be in the redraw club I’m afraid. Excuse me if I state the obvious here! There are times when a fixed rate home loan can provide some certainty over a period of extra financial or emotional stress. Interest rates can move further than you expect. It may be worth considering fixing a significant part of your borrowings in the following circumstances: Many errors were made from about Jan 02 to Dec 04 with staying variable, and from about Jan 07 to June 08 with people fixing for long terms. You can see on the charts that from Jan 07 to June 08 there was not much pressure for rates to go up further. However in Jan 02 to December 04 there was significant upward pressure on rates. This indicator could have assisted many borrowers at these times, to make a better decision on whether to fix or not. |
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