Fixed rates are going to increase

WBC 3 year fixed loan has gone 85 points up since I fixed back in May. Other loans I fixed for 5 years (back in May) have seen rate rises of 95 points. Gees.

 

So from a refinance point of view whats the best play here?

We have just gone through this whole ****show with 86400. They delayed the refinance for months (assuming whilst negotiating with nab). Finally acquisition was agreed and came back to us saying my job was two new. (Asked for 3 payslips in the previous 3 months with zero issues) I think it had to do more with the application being 1.85% fixed for 3 years.

From a future standpoint and i know its hard to predict, is it worth locking in a 2.5 for 2 years with the benefit of an offset account, or locking in 5 years at 2.7 with no redraw or offset ability.

 

Ya ain't seen nutin' on the interest rate side....it ain't over yet....next stop variable rates.....expect most rates to be 2.5-3% for OO and 3-4% for IP loans. A fear a lot of the great unwashed are going to get caught up in this.

A lot will not sell down.....as they don't want to pay CGT.......but when the market changes for the worse...harder to sell...higher rates....harder to refinance/borrow...is this the perfect storm in 2-3 years?

 

So essentially most conservative play would be the fix for 2-3 years, then by the time its to late for the CGT avoiders to recoup investments due to the market, rates will lower due to trying to get people back in or keep people afloat?

 

Obviously not advice or anything... I fixed my IPs for 3yrs and my PPOR for 5yrs... but I'm a conservative, risk-averse, long-term scaredy cat!

 

Haha im exactly the same, the idea was the refinance was going to unlock equity for an extension to further increase the equity. So the offset feature would of been fantastic.

But im starting to think that maybe the rate increase will outweigh any savings made in the next 5 years and maybe to just lock it and make extra repayments instead of having any liquidity.

 

Meh - why should you worry if you aren't even over leverage?
Anyone less than 50% LVR will be just fine.
Just those investors and owner whos over 80% should be feeling the heat.

 

Not quite...lot holding portfolios even with 50% LVR is still severely negatively geared. That because they have properties returning 2.5% returns...mostly higher priced...land tax will take out the returns. See this all the time.

Add to....that the Qld land tax situation...it will get interesting...

I never rest on my laurels...its like business you need to be on the top of your game to survive...even in property.

For myself..it is going the other way... I have properties I bought for under 250-300k now about to get $500pw.

 

Have you seen the Logan thread? Not in your life there are getting 2.5% returns.
Even I am not getting 2.5% return. Sitting on 3.5% to 4.0% which was always my target because of the risk rewards scenario.

 

A return of the P&I cliff is where the risk lies for many investors. yields of 3.5% - 4% seem good now because IO rates are well below that ...but consider a situation where rates have nudged 1- 2% higher and assessment rate buffers have landed 1-2% higher as well. Refinancing or extending IO may become problematic for some...or perhaps for many. It was a problem just starting to take shape in 2018 and 2019 but has been largely avoided from 2020 until now because of emergency rate cuts and lots of stimulus, but papering over cracks isnt the same as fixing cracks... and now there are even bigger debts and lower yields in play .... so the P&I cliff back may well come back into play at some point... and if it does, 3.5% -4% yields will become inadequate quickly. They will not cover the P part of the P&I repayments if rates are at 4% +.... that's a big chunk of change to find to hold a property ( and a really big chunk if there are more than 1 where this occurs) , and none of it is deductible .

 

So what are the fixed P+I on offer by big 4 ? Whatever on the websites, or one can negotiate further?

 

Mate never underestimate things....thungs can go to crup in a very short period of time...

I have already renegotiated the following:

1. 2.57% P&I with Suncorp (was 2.94%)
2. 3.04% IO with WBC (was 3.39%)
Working in RAMs and St George to get it under 3% for IO. Waiting on 2 loans worth 600k to come off 4% (old 3 year fixed).

Have also fixed $1m in loans for 2.29-2.39% fixed for 2-3 years.

As I said never rest on ya laurels....yield can go crap if rents tank.

 

Should be okay...I reckon that rates will start rising somewhere late 2023-2024 and expect it to peak around late 2025-2026. I suspect we will see rates between 4-5% sometime then...and then come off to somewhere in low 3s..as it will kill a lot of people.

 

I don’t think it will go as far as you think. Back to 4% max for P&I like pre-covid for your 2-3 years fixed.
The market can’t stomach much higher.
I never had any problems when it was 5% back in 2015. I am not the people the bank need to worry about. All it means I will go back to negative gearing again.

 

Yes when the interest rates reached 24% pa the property market or I could not stomach it either.
It permanently reduced my appetite for property.
I always wondered if I had not experienced high interest rates and become risk adverse how big my portfolio could have ended up as.

It certainly changed me to rely on income/yield .

 

Hi, where you get 2.7% for 5 years fixed loan? thanks

 

Is it worth locking all loans 5 year fixed now i.e 3%?

 

Let's see.. it just show people don't understand inflation or impact on global markets on mortgage funding. Watch the USA. If they raise base rates from 0 to 2.5% we will follow. NZ has already done this. Our RBA are dozeys. They need to gently tap on the brake a 0.25% raise will be enough of a signal. Let's see. Already have a strategy and am executing. Most of brokers on here do not have the experience ....some are just theorists.

 

Rates may rise but I suspect rents will too. May not be across the board but in general.

All signs are pointing to the latter - lower pipeline of new devs, borders reopening, immigration to restart etc. X factor is how many expats who came home leave the country again.

Chart below - from Pete Wargent's Daily Blog.

 

It’s not rocket science. 1+1=2.
If you can’t work it out. You have a real problem buddy.
US rates from 2018-2019. From 1.5% to 2.5% and it crash right afterwards.

now with debt twice the amount. It won’t need to raise to 2.5% before a crash.