hey guys i'm considering buying a property in HK soon but i'm really paranoid that u can't fix u're rates like u can in oz and i'm really worried that the rates will go up especially since HK currency is pegged to the US... so i'm racking my brains trying to figure if there is some way i can hedge itmyself...
i'm thinking of shorting a US treasury with the notional size of the bill the same as the size of my mortgage. hence if rates go up the bond should decrease by the same amount as the excess interest i have to pay.... do u think it would work? i'm thinking of shorting the bonds using cfds that u can get at www.igmarkets.com.au
of course i'm assuming the peg for the USD to the HKD will remain for some time.
can someone pick a hole in what i'm doing and why it won't work? thx.
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One thing we are doing for our property in Australia is borrow in Yen (at about 1.5%) and then we have bought some stock/funds in Yen to hedge our position - just in case the currency appreciates alot over the next few years.
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how do u take a retail loan in yen?
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Some of the banks will give you a mortgage in a different currency - Llodys bank, Barclays, some of the Aussie banks, etc.
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Would definately advise against Yen on Aussie property at the moment. The Yen has never been weaker against AUD and although in the short term it may continue on this trend eventually it will strengthen/AUD weaken and you will owe more on your property.
A hedge in Yen may look nice on paper but the bank coming knocking on your door asking for money as they have made a margin call and you now owe less then 25% of your property certainly wouldn't be nice.
Don't get me wrong, multi-currency mortgages are great you just need to minimise the greed factor and decide upon the currency to draw down in for the right reasons not the cheapest.
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Glorypc,
Would you still advise against Yen loan on a Aussi property if we hold funds/stock in Yen that is sufficient to cover the loan?
HF
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