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You Heard It Here First

You Heard it here only a few months ago!     For the last few months our good friends (not), the banks, have been slowly pushing up the rates on fixed term loans and yes, you guessed it, all the other rates will probably follow in the very near future....

How Busy Has It Been?

Wow! Has this year been super busy or what? Who would have thought that we would see a market like this in our lifetime and especially riding the back of a global pandemic? As far as property searches go, some people are just “over it!”.Having said that, there are the...

Do You Buy Now or Drop Your Standards Later?

Choices are getting difficult.For the moment at least, choices are getting harder to make. If you’re trying to keep up with property prices by working harder and saving more, you’re currently fighting a losing battle. Right now, you’d be flat out keeping pace let...

Why Haven’t Prices Plummeted?

We’ve got Covid, a recession and had lockdown all over the place, but property remains strong and seemingly getting stronger?We all remember the dire predictions in the press this time last year with most property pundits espousing everything up to a total collapse of...

How Many Property Booms Have You Missed So Far?

You can count them on this graph.Personally, I haven’t missed any since 1998. Can you guess why that is? The reason is because I bought my first property in 1998, so I’ve had my toe in the water ever since then. Sure, there have been a couple of slower periods in that...

How Fast is Your Dream Slipping……Ahh…..Powering Away From You?

Have you been keeping a close eye on the market lately? Haven’t we all! It’s hard to believe some of the crazy things going on at the moment. This makes it all the more important to take action so you don’t see your dreams like you see a jet fighter…………disappearing...

The Cheap Money Boom!

Are we really in a property boom period just now? Maybe, but is it really a property boom? What I believe we are seeing just now is the largest, most concentrated cheap money boom that I for one have ever seen in my entire life and I’ve lived a lot of my life, so...

Perfect Urban 5 Bed Oasis

522Have you got a ‘Brady Bunch’ family? Are Mum and Dad living with you?If either of these are true, this is the house for you. If you’re up for dual occupancy as an investment strategy, this works as well. The original home as a renovated self contained granny flat ...

Are You Positive that You’re Negative?

Jehoshaphat, “Negative gearing is the best property investment strategy”. Geraldine, “Are you positive?” Jehoshaphat, "Huh???" OK, so we’ve all heard about positive and negative gearing with regard to property investment. But which one is the best strategy? Put...

To Be or Not To Be……….a Rent-vestor.

It seems it was easier back in the olden days. Remember back when you were a kid? More to the point, remember back when I was a kid, back in the 60s and 70s. You either rented or you bought your own home. It seemed that there were only the privileged few who could...
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This age old saying in the vernacular also works with mortgages.

But why? Fixed interest rates on a home loan are often higher than variable rates, but it’s all dependant on the global bond market. Fixed rates are funded by the global bond markets, meaning the bank sells your debt in an international market, which is usually anchored to long term debt mediums, like mortgages and which often involve higher interest rates. To fully understand this function of international finance, you really need to understand the yield curve of certain securities such as the yield of a 90 day bank bill to a 10 year bond.

However, if you aren’t an international banker, why in the world would you need to understand that?

Here’s how I look at this problem

In my 23 year investing career, I have never ever fixed interest rates. There are two reasons for this:

Firstly, I don’t think my understanding of global finance markets is quite as good as that of the team of accountants, university trained international finance and economic professionals and other sundry finance specialists who make up the large finance research teams that the banks use to determine future strategies.

Secondly, the main reason, is that I think back to all the times the big banks have helped me out by keeping interest rates low, dropping them as soon as the RBA does, putting them up only if and when they absolutely must. Generally, giving me a fair go because they have their customer’s interests at heart.

“Really?”

No, not really.

What I do think however is; are the big banks more interested in helping me out, or making huge profits? We only recently had a Royal Commission that proved without doubt that banks are more interested in making huge profits than caring for customers, even customers who are still with us, let alone those who have passed away.

With this in mind, I wonder why the banks would want to set a fixed interest rate for my benefit.

What do you think?

Can you think of any reason why banks would forego huge profits for our benefit? No, I can’t either. Generally speaking, if the banks are fixing interest rates for a certain period, then it is for their benefit and not ours.

This is not to say that you should never fix your own mortgage for a certain period to suit your own individual circumstances. There are certainly times when a fixed rate is beneficial to your goals, your strategy and your situation in general. Furthermore, some people just like the idea of knowing exactly how much repayments will be every time for a fixed period.

Before you make any decision to use variable or fixed interest rates, speak to your broker, accountant or other finance professional to determine what is best for your situation. Once you’ve done that, speak to us here at PPBA to discuss the best property to suit your situation.

Call us – 0490 020 801

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