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    Home»Investments»Private property issue #123 – What interest rate…
    Investments

    Private property issue #123 – What interest rate…

    August 22, 20242 Mins Read


    Should I just go for the floating rate, then?

    Some investors will then ask: “Well, if fixing for 6 months may make sense. Should I just leave my mortgage on floating?”

    The answer is ‘probably not’.

    The floating rate is about 8.39%. So let’s say you leave your mortgage on floating for 6 months. And for simplicity, let’s say that the rate doesn’t change.

    After those 6 months, you’d need to get a 4.86% or less for the floating rate to make sense from a cost perspective.

    Interest rates probably won’t dive that far by February 2025.

    So, I don’t see an argument for floating your mortgage for any sustained period.

    Don’t knock the 5-year rate

    Now, here’s a curveball.

    Almost all mortgage advisers will tell you not to touch the 5-year rate with a barge pole.

    And for most people, that’s true.

    But I’m also seeing an argument for locking in for 5 years.

    After all, the best 5-year rate right now is 5.69%.

    If you’re someone who’s 5 years away from retirement and values certainty, a longer-term fix could make sense.

    Now, I’m not saying everyone should jump on the 5-year bandwagon. Most people shouldn’t.

    But your personal circumstances will impact the interest rate you choose.

    So, what interest rate should I choose?

    The general rule is if you think interest rates will go up, you fix for longer.

    If you think rates are going down, fix it for a shorter time.

    So, most people will choose to fix shorter, even though the short-term rates are currently higher than the long-term rates.



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