Fixing interest rates

[WillG]

I have noticed that 5 year fixed rates are less than standard variable rates. This would indicate to me that the banks think rates will drop and stay low for quite a while

I am considering keeping IP1 variable and fixing IP2 for 5 years to get the best of both worlds. (IP1 and IP2 are currently both variable)

Any thoughts, comments ?

[XBenX]

5 year rates seem quite attractive atm

but on the other hand banks are only out to make money so 5 yr rates are obviously low for a reason....

my personal opinion is at 6.2ish % for 5 years its a small premium to pay to fix what is usually your largest expense

[capitalist]

Hi WillG: what sort of rates is your bank quoting for 5 year rates and which bank is it?

I got an offer from the CBA for a fixed rate of 5.99% for 3 years. What's your opinion of this and how does it compare to your own bank?

I have a discounted rate at the moment (5.76%) which expires in June and reverts to the standard variable (currently 6.57%), and i'm also tempted to take up their 3 year offer.

[WillG]

Hi Capitalist,

No bank in particular. I was looking at a comparison table in the paper on the weekend. The typical 5 year rate was between 6.45% & 6.5%.

I just read another of your posts. You are very motivated. I hope you archieve what you have planned.

[Bill.L]

Hi

If the banks think that longer term rates are coming down, then thats good enough for me. I will keep my loans variable until I see signs of the banks raising longer term rates. Then I'll fix.
OK I know that I won't get the lowest rate possible but you might not by locking in now either.

bye

[WillG]

Hi Bill.L

I agree that leaving the loan variable will probably cost you less based on the 5 year rate.

In the past 5 years I don't believe the banks have got interest rate predictions right. If interest rates get lower and lower in the next 5 years it may indicate the banks are expecting a recession of some sort

[spot]

5.99% & thereabouts fixed for 5yrs is seriously tempting me at present.

For those of you that are interested the following site provides a free weekly newsletter that I find a nice easy way to keep a regular eye on interest rate movements.

http://www.yourmortgage.com.au/news/

[Bill.L]

Hi WillG

I think that banks have got interest rate predictions correct as that is how they make their money, and they have been making plenty.:D

bye

[WillG]

Hi Bill,

I agree with what you are saying but not so long ago fixing was more expensive than variable.

I tend to read that the standard variable rate 'has a good chance' of coming down but won't take it for gospel.

[INVESTRON]

the 3 year rate is more appealing than the 5 year, but 3 years goes so bloody fast.

i fix for 10 years - makes me feel nice and safe. mmmmmmmm.

[capitalist]

Thanks for the wishes WillG - much appreciated.
Actually i just had another look at the CBA letter, and it says 5.94% for 3 years, discounted by .15% from their usual 6.09% for 3 years. Plus they will waive the usual establishment fee of $600.

But you're right Investron, 3 years does go by quickly. Although i was once told that you should refinance about every 3 years to see what's around and not become complacent with you're bank.