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Loan interest rates - thoughts
peteburr
Posts: 5 Forumite
Hi All,
Now I know noone has a crystal ball but would like to know what users of the forum think about this. I have my own thoughts and am a little undecided still. I'm asking out of interest so dont worry about me acting on advice from an anonymous forum. :op
I'm a frequent reader of the posts here and would be interested to see what some of you think.
Currently have a loan as part of my business. Its secured against business property which I own.
Its currently a repayment loan and I want to move it to interest only in order to free up more cashflow each month for business expansion. I can easily afford the current and new repayments.
It turns out that in the current climate I can move to interest only for about 1% more than my repayment loan currently is (plus a 1.75% arrangement fee of course!!! ha!)
Now I asked the bank advisor about fixed, interest only options and it turns out I can fix for 10yrs for an additional 2% and for 15years for 2.25%.
That sounds quite good in my opinion but then I started thinking I don't know much about historic loan rates (this loan is relatively new) and that could be an important bit of information although not a definite marker to future rates!
The 15 year option would leave the overall rate at around 5.75-6%. That seems quite high to me even though I am assuming rates will go up in 2yrs or so...again no crystal ball.
I know there is no definitive conclusion but assume the answer to the following question is YES if you thought this sort of loan would average more than 6% over the next 15yrs and none of us know the answer!
Q: If you were in my position would you add the 2-2.25% premium to fix over 10-15yrs?
Have rates for this sort of loan been consistently over 6% in the past and, more importantly, do you think they will be in the near future?
Really interested to read everyones thoughts on this subject as I guess the similar principle applies to lots of borrowing/lending rates and people are having to take this sort of decision every day. Think we'll get some varied answers!
Pb
Now I know noone has a crystal ball but would like to know what users of the forum think about this. I have my own thoughts and am a little undecided still. I'm asking out of interest so dont worry about me acting on advice from an anonymous forum. :op
I'm a frequent reader of the posts here and would be interested to see what some of you think.
Currently have a loan as part of my business. Its secured against business property which I own.
Its currently a repayment loan and I want to move it to interest only in order to free up more cashflow each month for business expansion. I can easily afford the current and new repayments.
It turns out that in the current climate I can move to interest only for about 1% more than my repayment loan currently is (plus a 1.75% arrangement fee of course!!! ha!)
Now I asked the bank advisor about fixed, interest only options and it turns out I can fix for 10yrs for an additional 2% and for 15years for 2.25%.
That sounds quite good in my opinion but then I started thinking I don't know much about historic loan rates (this loan is relatively new) and that could be an important bit of information although not a definite marker to future rates!
The 15 year option would leave the overall rate at around 5.75-6%. That seems quite high to me even though I am assuming rates will go up in 2yrs or so...again no crystal ball.
I know there is no definitive conclusion but assume the answer to the following question is YES if you thought this sort of loan would average more than 6% over the next 15yrs and none of us know the answer!
Q: If you were in my position would you add the 2-2.25% premium to fix over 10-15yrs?
Have rates for this sort of loan been consistently over 6% in the past and, more importantly, do you think they will be in the near future?
Really interested to read everyones thoughts on this subject as I guess the similar principle applies to lots of borrowing/lending rates and people are having to take this sort of decision every day. Think we'll get some varied answers!
Pb
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