ezihedge Solutions Pty Limited
In most aspects of your life you can purchase some form of insurance to protect against the unforseen. Be it for; your car, travel, health, income protection and so on. Until now the only insurance protection you could not find was a secure, stress free and most of all inexpensive solution for the biggest risk of all - a change in interest rates.
The entire time that you are gathering all your assets and developing your retirement base you are constantly being charged interest if you borrow. We all know that a rise in interest rates can make quite an impact on your quality of life by reducing your spending ability. Now wouldn't it be nice to be able to buy interest rate protection as an annual premium.
Which is why we at the interest rate protection company (IRPC) are now offering interest rate protection to those who are fortunate enough to be able to buy a home or run a business.
and increasing pressure to meet the needs of the loan
(which would place you under even more pressure - pressure to meet the needs of the loan !). Stop for a minute and read that again - ! Not your needs the loans.
Well guess what - surprise, surprise,
Today's consumer, it is fair to say, is enjoying their most prosperous times ever when it comes to choice of financial products -- coincidentally at a time of historically low interest rates.
Most financial institutions encourage the use of 'leverage' to expand your asset base 'tax effectively' and competition has seen them need to be aggressive in developing loan products to 'wrap-up' consumer finance in the home loan as a package.
Think about it for a minute... you can get all forms of insurance protection for just about every thing you can think of. your car, contents, travel, personal effects, income protection, health, disablement, unemployment the list goes on and includes the only 'sure fire' bet - death.
Just think of how much better we would ALL sleep if we knew that no matter what, we had the best and cheapest protection available against rising interest rates. Even better - we don't need to negotiate a maze of potential incidents that might exclude us from receiving the protection we paid for if and when the event occurs.
If you are interested in getting interest rate protection then click here to get the protection you want at the best possible price.
IRPC Pty Limited has exclusive agreements in place with sellers of risk protection that enable it to deliver optimum prices to loan consumers. Under those agreements it is not possible to void the protection once it is agreed upon and purchased. No refund will be forthcoming for any part of the purchase. It will be necessary for the purchaser to purchase the protection in full up front. No part payments are acceptable. A comprehensive database with the particulars of any defaulting party will be maintained to ensure that all industry participants are able to refuse that party the same protection ever again. We at the IRPC will never offer defaulters interest rate protection EVER again.
So what exactly IS on offer out there at the moment to help YOU protect yourself from adverse changes to interest rates?
The consumer is faced with a rather unspectacular set of options and those options vary depending upon your financial status with your particular lending institution or loan provider. The protection offerings begin with standard suggestions of fixed, variable or a mix of the two ( commonly called 'fifty fifty' ) followed by offerings of standard fixed rate periods that are between one and five years.
The biggest problem for the consumer is how to get protection that starts to offset and 'work' sooner for a reasonable price. A typical situation that a consumer faces is similar to the example case that follows :
As at Dec 14 2004.
The cash rate is 5.25 % but the banks are charging an average interest rate ( derived from the complete portfolio of loans on offer at the largest mortgage provider ) on their home loan of 7.0 %. The client decides that they can manage a 50 basis point increase in interest rates but are looking to protect themselves from any more than that occurring in the next 12 months. The client has the view that the likelihood of the event occurring is a little too high for comfort and they sensibly decide to purchase protection ( they instantly sleep better ).
The current standard variable rate is 7.0%. The insurance protection covers a minimum of $1 million dollars and that protection begins when interest rates exceed the 50 basis points you think you can tolerate. You purchase the protection and if rates move more than 50 basis points in the period that you have protected yourself for then you pay no more than the 50 basis point increase you budgeted for. You have $1 mill worth of protection to cover your increased loan costs with the benefits of the interest rate hedge to be credited directly to your loan account and work to compound in your favour. The product is not specifically for home loans and is available to all borrowers who would like to protect themselves against adverse interest rate movements. Therefore there can be no reason for businesses not to purchase protection as it would be an expense in managing your costs as a business.
Now, you mightn't think that this sounds too fancy or special but lets look at the result of your actions.
If the cash rate is 5.25% and rates move to 5.75 % then the banks will quickly pass that on to you and your home loan will move from 7.0 % to 7.5 %. As at 14/12/04 nearly 70 % of the lenders listed on the Mortgage Choice web-site offering fixed rates for a 1 yr period in excess of 7.0% !!
This means that the repayments on a typical 300k loan went from ..to Interest rate protection to cover you for moves in excess of 50 basis points in the year costs ( $350.00 per mill so say $400.00 ). So if rates went from 5.25 to 6.0 % and the bank moved you from 7.0 to 7.75% then you would be protected at 7.5% and any gains from that protection beyond 7.5% would be applied directly to your loan account. It's merits as a risk management product are clear. You buy protection for $1 mill so the protection would more than cover your increased loan costs for the chosen period.
The above example notes a tolerance for 50 basis points. Of course you are able to purchase protection more aggressively to suit your needs and capacity to act. Let's say the client has the same view but can't tolerate more than 25 points in cost but still thinks it's going to move more than 50 points. They can purchase 25 point move protection for the period but of course if the probability is higher the cost of protection will be higher. It still will be the cheapest protection available to the client for the period. The client would be protected at 7.25% and be sleeping very well. The cost of the protection a necessary expense.
Businesses could aggressively utilize this function to purchase at the money protection as a yearly premium. In fact the best thing about this product is you can buy your yearly protection each year just like term life insurance.
The one thing you can be sure of is change. It's the aim of us here at the IRPC to increase the health of all loan holders by taking the stress out of interest rate management so that everyone can feel a little more relaxed which means hopefully - they get to sleep better.