Gazing into the Crystal Ball
(Interest Rate Edition)
Happy Friday everyone! It’s only ten days away from Christmas and the season of family, friends & laughter is upon us.
Trouble is, I don’t have a crystal ball… and nobody else does either.
Today’s focus is on interest rate expectations for 2019. I’ll also show a method for assessing whether a rate is a good value or not and how to take advantage of the current interest rates.
Interest rates are still at their all-time lows.
So how do you take advantage of this and how can you tell if it’s a good offer?
This creates an interest/break fee arbitrage opportunity which sometimes
How to compare interest rates.
Let’s use a case study as an example.
Which is the better rate?
You can break down the 2 YR rate as a 1YR rate + 1YR rate in 1 year’s time.
4.15% = (4.05% + 4.25%)/2
If you think there is a chance that the 1 YR rate will be greater than 4.25% in a year’s time, then the current 1 YR rate is good value. If you think the 1YR rate will be less than 4.25% in a years’ time, then the 2YR rate is better value. If you’re on the fence, then adequate interest rate averaging must take place in your loan structure to manage the risk. Our clients often have loans on various terms because the truth is, we cannot truly predict the market, therefore, must make the best decision possible
For your own practice, let’s say you were offered 4.39% for 3 Years. What sort of 2-year rate would you need in a years’ time to breakeven?
Christmas and the holiday season is often an expensive time of year. An introduction to us could possibly identify thousands of dollars of savings for someone who’s mortgage has never been reviewed.