Interest rates on loans have been reducing for several years now, and along the way we are often asked, what is happening with rates, and what decisions should we make? For example, should we fix our loan, should we stay variable, should we hedge our bets and split, and how much should we put in each option?
As common as these questions are, the answers to them are never known with certainty, are never easy to make, and there are clear advantages and disadvantages of each strategy. Personal circumstances vary from client to client, not just now, but into the future often, 1,2, 5 and 10 years ahead. It is therefore important, that each client’s situation is carefully considered. At Nexus Private Lending, our objective is to educate you on the pros and cons of all strategies, consider your individual circumstances, and provide you with the information you need to make those decisions with a degree of confidence.
In recent weeks, we have seen very attractive rates appear in the 2-3 year fixed rate space for our investors who often seek interest only repayments. Rates at around 2.49% are very attractive right now, and are generally around 0.60% below the current equivalent variable rate. When purchasing new property as an investor, gross yields normally exceed 4.50% in Brisbane. It is therefore possible, to lock in a net positive return on the purchase, by taking a 2 or 3 year fixed rate on a higher proportion of the debt. With substantial depreciation benefits available on new property, you can achieve a negatively geared property for tax purposes, where the cash flow is actually positive. Longer term fixed rates have recently started to increase. It is a sign that the market sees rates rising longer term, which supports a view that we may well be at the bottom of the cycle. If you are thinking of adding to your portfolio, now is a great time to consider your plans.