interest rates

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  • Interest Rates
    • Variable
      • Advantages
        • Repayments reduce when interest rates fall
          • Additional repayments can be made without penalty
            • Shorten the term of loan if repay at higher rate
      • Disadvantage
        • If interest rates rise-repayments will rise
    • Fixed
      • Advantages
        • Predictable payments
          • Protection from rise in interest rates
      • Disadvantage
        • No benefit if there is a fall in interest rates
          • Early payout penalty
    • Long term
    • Short term
      • Higher interest rates
    • Combination
      • Interest fixed for inital period then reverts to variable
        • Hedge against interest rate rises
    • Split  loan
      • Part fixed and remaining is variable
        • Hedge against interest rate rises
    • Comparison Rates
      • loan interest rates calculated after adding fees and charges to the lenders advertised rate
    • Personal investment strategy
      • To achieve highest return for most acceptable risk
        • Switching from one investment product to another
          • Rising interest Rate
            • Savings
            • borrowing
              • Risk of default
            • demand for property drops
          • Falling interest rates
            • savings
            • borrowing
            • Demand for property rises

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