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What is your three-year view on interest rates?

I am going to buy a rental property and want to fix my interest rate for three years. What do you see happening within the next three years?

The money market thinks interest rates are on hold for the rest of the year but these guys can get it wrong.

The economists think there will be two to three interest rate rises this year but many of these predictions were made before the Queensland floods, unlike the money market’s view.

I believe there will be at least one or two this year and maybe one or two in 2012, and so I see one per cent higher rates over two years for home loans.

Now if the world economy throws off debt worries, you could see another one per cent in 2013 but, on the other hand, if debt concerns create recession worries, then interest rates could fall. Historically or lately, interest rates peaked in the nine per cent region but as we are more indebted nowadays, I think home loans in the higher eight per cent region will spook consumers and hurt business.

I hope these guesses by me will help you make the right decision. For homebuyers, I warn that fixers often lose but for a business such as being a landlord, knowing your interest repayments are fixed can make good business sense. I reckon a three-year fix is more timely now than a five-year fix but that’s only an educated guess!

For advice you can trust book a complimentary first appointment with Switzer Financial Services today.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

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Published on: Friday, January 21, 2011

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