Friday, April 28, 2006

The great interest rate debate

Once more, this time on the back of the fuel price rise debacle of recent weeks, the spectre of interest rate rises arrives once more. And, as usual, there is the outcry from people who will be sent to the wall if rates rise a mere 0.25%.


Something, however, lets me feel very litte pity for these people. It's not that their predicament is out of the ordinary, quite the opposite.

But lets face it, if you, as responsible finance officer for your family, do not examine the worst case scenario for a loan of this magnitude, you have only yourself to blame. The banks and mortgage brokers will bend over backwards to give you the money, merely hinting at the cost per month to repay. And, naturally, its all based on current interest rates.

Most of these loans have a 30-year term. Three, zero, thirty. A lot can happen in two years, let alone thirty. 6.74% interest rate now, fine. You can bet your bottom line that it wont hang around for 30 years. If you dont ask your mortgage institution to calculate differing rate repayments, more fool you.

While a lot of cashed up people are getting out, sitting on their money, and waiting for the near future. When there'll possibly be a lot of places going rather cheap.

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