Maintaining short positions can be costly in terms of interest or dividend obligations, while opportunity cost of suboptimal market timing is another factor to be considered.
Maths can get ugly
Anyone who had a standard variable rate mortgage in 2009 at above 8 per cent will recall that principle and interest repayments could be excruciatingly difficult.
Consider that a homeowner with a $600,000 interest only mortgage at 4.5 per cent today might be paying only ~$2,250 per month, whereas as and when the mortgage flips to principal and interest, were the mortgage rate to have increased to 6 per cent the repayments could be more than 50 per cent higher, even on a 30 year product.
Mortgage repayment calculators don't always give the option to calculate what would happen in a 7 per cent scenario, but the answer on a 30 year product might be a potentially punishing ~$4,000 per month.
Prospective borrowers should take into account the likelihood that mortgage rates may move higher over the years ahead.