3 & 5 year fixed rates thread

[MC1]

Because the banks are always ahead on fixed rates. Think of it like this:

Say the economy is going down, variable rates are falling. Fixed rates fall to in anticipation of rate decreases in the future. Now, two scenarios can be played out here:

1) Once the economy looks like it is about to recover, the yield curve becomes positively sloped again. This means that fixed rates will go above variable rates, and even if you fix you will be paying a lot more than the variable rate with no guarantee that variables will go above the fixed rates. So banks win.

2) The economy gets worse, and rates fall. They will fall below what you fixed it at. You lose, banks win.

The exact same thing applies if the economy is booming and you want to fix your rates so that you are insulated from rising interest rates. Many, many people got caught up in this back in 2007/08 when they fixed rates at 8-9% only to see them fall down to their current levels of 6% today.

Plus, banks adjust their fixed rates all the time based on the money market and how the yield curve is looking. They will always give you a fixed rate when it suits them. You are betting against a company that makes it living off betting on interest rates - I don't like doing that. Plus you also have the other inconveniences of fixed rates like limited redraw, limited offset, break costs if you refinance/sell, no equity release etc.

I finally agree with one of your posts Aaron. Good post

 

[luckyone]

Typo or not, mind sharing who is your broker? i will fix if it is 5.59%

Sure, it's Ed Nixon from Trilogy funding who sent me the email. here is an extract.


Fixed Rate Update

Fixed rates have gone south in the past week.
Maybe this is a sign that variable rates will go down next month?
The best on offer are:

5.59% Westpac (comp 6.55%)
5.74% Choicelend combo offer 3 year fixed (comp 6.16%)
5.79% CBA MAV package 3 year fixed (comp 6.52%)
5.85% Citibank 3 year fixed (comp 6.87%)

If you are keen to fix please don't hesitate to phone us and discuss the options.

 

[MikeR]

I will add my 2 cents worth. Prior to being a mortgage broker I was for about 7 years a 90 day bank bill and 3 year bond interest rate futures trader with ANZ and the old JB Were and Sins

Ha ha......

 

[MikeR]

Here is a graph i compiled from RBA data and it is showing that historically fixed rates are looking cheap at the moment when you can get a 3 year fixed rate for 5.59%.

Jon, can you please redo that graph from August 1996 onwards only so that the top of the y-axis scale is 10% and the y axis scale is in 1% increments, not 2%.

 

[skater]

Sure, it's Ed Nixon from Trilogy funding who sent me the email. here is an extract.


Fixed Rate Update

Fixed rates have gone south in the past week.
Maybe this is a sign that variable rates will go down next month?
The best on offer are:

5.59% Westpac (comp 6.55%)
5.74% Choicelend combo offer 3 year fixed (comp 6.16%)
5.79% CBA MAV package 3 year fixed (comp 6.52%)
5.85% Citibank 3 year fixed (comp 6.87%)

If you are keen to fix please don't hesitate to phone us and discuss the options.

I'm interested in where he got that Westpac rate from. When I check online, it says 5.99 for three years. Professional package will bring it to 5.79.

 

[Shahin_Afarin]

He has either made a typo or he may have been referring to St George instead of Westpac. He has forgotten to mention Suncorp @ 5.57% but they price based on LVR so you must be below 80% to get that rate.

 

[jonmardell]

Jon, can you please redo that graph from August 1996 onwards only so that the top of the y-axis scale is 10% and the y axis scale is in 1% increments, not 2%.

Hi Mike, is this what you are after? It is important to remember that these are the average rates amongst the banks.

 

[luckyone]

He has either made a typo or he may have been referring to St George instead of Westpac. He has forgotten to mention Suncorp @ 5.57% but they price based on LVR so you must be below 80% to get that rate.

I'll email him and find out.

 

[MikeR]

Hi Mike, is this what you are after? It is important to remember that these are the average rates amongst the banks.

Yes, thank you.

Just makes it easier to see the movements when the scale is more compressed..... it would be even better if you set the minimum value of the y-axis to 5.0% and then the y-axis could run from 5% to 10% in 0.5% increments.

 

[chilliblue]

With regards to St George, ensure that your broker arranges a rate lock letter at the 5.59%.

 

[Rolf Latham]

what about a smart 30 year rate

Its time we should get assumable mortgages : )

http://www.bloomberg.com/news/2012-...all-to-record-lows-with-30-year-at-3-49-.html

ta
rolf

 

[Player]

Its time we should get assumable mortgages : )

http://www.bloomberg.com/news/2012-...all-to-record-lows-with-30-year-at-3-49-.html

ta
rolf

As long as they are assignable to anyone, not just thru an estate and non-recourse and jingle mail enabled. I'm in...........

 

[shuggy]

Hi Mike, is this what you are after? It is important to remember that these are the average rates amongst the banks.

Thanks Jon, nice graph. If you redo it again as Mike suggested with value of y-axis running from 5.0% - 10% in 0.5% increments, could you please also include 5yr fixed.

 

[luckyone]

I'll email him and find out.

I emailed him and he responded that it was a mistake. (The 5.59% fixed rate from Westpac)

 

[matto_]

3.49% for 30 years. cashflow positive guaranteed for life.

 

[skater]

3.49% for 30 years. cashflow positive guaranteed for life.

LOL! I'll take me as many of those as I can get, thankyou.

 

[JIT]

BOQ 3 years at 5.55% pa is the new leader I think.

 

[JIT]

3.49% for 30 years. cashflow positive guaranteed for life.

These sorts of rates would change the structure and nature of real estate investment in Australia completely.

Woudn't hold out for this!

May not be CF+ve if people to choose to buy rather than rent at such low rates.

 

[Aaron_C]

These sorts of rates would change the structure and nature of real estate investment in Australia completely.

Woudn't hold out for this!

May not be CF+ve if people to choose to buy rather than rent at such low rates.

There's no point quoting a low rate if no one can ever qualify for it...

 

[oracle]

3.49% for 30 years. cashflow positive guaranteed for life.

You can expect to get such rates when

- house prices have fallen atleast 25%
- unemployment rate at 8%+
- banks not lending money unless you put down 30% deposit
- oversupply of housing thereby making it extremely difficult to rent out.

I know which one I would choose...lower rates or more stable housing market.

Cheers,
Oracle.