Margin loans and interest rates

[Pager]

I pre paid interest on my Margin loan last June for 12 months so its only about 6 or 7 weeks until I either pre pay again at a much higher rate or go on the variable rate that is currently much higher also, I guess there are quite a few others here in a similar position.

At this stage with interest rates going up here in Australia but down around the World, im looking at maybe only pre paying for 6 rather than 12 months, so just wondering what others maybe doing or thoughts on were interest rates may be headed here in Australia in the next 12 months, some views ive seen suggest rates may not go much higher and maybe start falling at the end of the year, hence my thinking to only pre pay 6 months this year, the Tax effective issue I believe should be a secondary consideration.

Cheers

Pager

[tech/a]

Cookie

I'm variable and always have been.
In the big picture Ive always seen the interest component as a small concern.
The other consideration is that if I'm not fully utilizing my full margin capability I'm only being charged interest on that which is being used over the period its used.
Unlike yourself the tax component is a high priority in my usage of other peoples money. (Trading,Property,Business).
I get it 45% cheaper as a deductible expense personally and 30% as a Company.When your using sizable amounts this isn't to be sneezed at.

On the Property front I locked down rates 6 months ago for 3 yrs.
Development capital however is still variable as I need the flexibility.

[Rainmaker2000]

I've always found the pre-payment issue to be of little interest........Pre-payment is only a marginal tax benefit and I have no idea how much loan I want from month to month......it depends on how much value there is out there....I'm maxxing out now during the lull but hope to be almost without margin once optimism hits the market and my stocks again.....

[Pager]

I guess everyone’s situation is different.

I’m a long term investor rather than a trader for stocks, all my active trading is in Futures and Options.

I pre pay a set amount each year that’s less than the total loan but generally find im paying variable on a small part of the loan being the difference between the pre paid and the full loan, I also keep myself fairly conservatively geared so any adverse moves in the stocks im holding wont cause a margin call, although I appreciate it could still happen.

At the end of the day the interest rate im getting charged is not a major consideration as long as its competative with other lenders but every little helps, by pre paying last year I have saved myself quite a bit of interest although that was not a consideration at the time i pre paid.

The Tax issue is only in which financial year i want to claim the intrest paid, as from day 1 ive pre paid so if i go to variable at the end of June i have only a small amount of intrest to claim compared to previous years this financial year.