You may remember I recently interviewed Australia’s leading debt expert Dominique Grubisa, who is a busy lady as she is a barrister, debt expert, speaker, author, mother of three kids and a wife. Dominique has taken time out of her busy schedule to chat to me about a topic that may interest a lot of nurses who have a mortgage and are considering fixing or securing the interest rate on their loan for an agreed period .
Rich: When is the best time to fix interest rates?
Dominique: Well it seems that the ‘inflation genie is out of the bottle’ to quote Wayne Swan and interest rates are on the rise. I won’t go into what I think about this (obviously it’s no good for homeowners but I also think it’s no good for the economy and that the Government and the RBA are totally misguided in their monetary and fiscal policies.)
But who am I to criticise, it’s no use whinging and whining about things we can’t change is it? What can we do to protect ourselves then? The urge for a lot of people is to run out and fix their rates now before things get worse.
At times like this, though, I think it pays to be contrarian. As Warren Buffet said “Be fearful when others are greedy and greedy when others are fearful’.
Rich: Has the best time to fix your interest rate already passed?
Dominique: For what it’s worth, I think that the time to fix has probably passed. It was about 12 months ago when all the talking heads were predicting interest rates to dive to 2.25% – you could fix for 3 years at 4.99% last December. Now the fixed rate is 2% or more above the variable rate.
Rich: Do you agree with the predictions in the media that interest rates will probably go higgher?
Dominique: Yes, interest rates will probably go higher but unless you are getting a fabulous deal, what’s the point of betting against the banks (who have a team of highly paid actuaries and economists working out the odds for them). That’s what fixing is – betting with the bank that the rates will go above a certain figure.
I was greedy and only fixed half my loans and am now kicking myself for passing up 5.25% fixed for three years because I wanted a 4 in front of my rate.
Rich: What lesson have you personally learnt from your experiences of whether to fix or not?
Dominique: The lesson I learned: when the fixed rate is one you are happy with and can afford, then go ahead but don’t act out of fear or adopt a herd mentality “Everyone is saying now’s the time to fix because rates are going to go through the roof”.
If there’s one thing I’ve learned in this business is that the herd is wrong – it just feels safer there but when the herd is saying something I think the best thing you can do, as Warren Buffet, the world’s most successful investor has done, is to do the opposite. Because if the media are screaming it from the rooftops, it’s already too late. Or as George Soros, another successful investor, put it “When my taxi driver starts telling me I have to buy shares, I know it’s time to get out of the stock market.”
To hear more pearls of widom from Dominique you can join her FREE webinar on next Tuesday 17th of November, 7.30 to 8.30 EST by registering on the link provided. Dominique will be discussing: Aussie Debt Rescue; Legal Loopholes. Click here to register https://www2.gotomeeting.com/register/469555963
Dominique always delivers great content so please join her online for the webinar.
Thanks Rich
Bank photo by Eperte at www.photoxpress.com
Hmmmm I have to say though it is very tempting to fix our home loan now before intrest rates go up even further and before they get to 18% like times gone by to fix the massive deficit we now have… what to do, what to do?
thanks that was interesting Rich and the webinars are a really good idea