3 & 5 year fixed rates thread
- Thread starter JIT
- Start date
Wouldn't that cause a drop in interest rates rather than a rise?
Just thinking, last time round we got as low as 4.99% for 3 years, and now we are currently at 5.99% for 3 years...
Maybe the sweet spot this time is somewhere in between??
I think I'd be happy with 5.5-5.75% as it would make my IPs close to CF neutral.
If 3 year rates drop to this level I might start fixing some of my loans.
Then wait a bit longer for any further drops to fix the rest.
The risk, when trying to pick the bottom, as I learnt last time, is that when fixed rates start to move the other way, the first move up might be a big one.
Eg. It might settle at 5.5%, but then the next move up might be straight to 6.25%, and your main lender might be the first bank to start the upwards moves.
So, that said, we should try not to be too greedy, and when an acceptable 5.x% rate looks us in the face... take it!
Interested in others' thoughts...
Sash..
Maybe the sweet spot this time is somewhere in between??
I think I'd be happy with 5.5-5.75% as it would make my IPs close to CF neutral.
If 3 year rates drop to this level I might start fixing some of my loans.
Then wait a bit longer for any further drops to fix the rest.
The risk, when trying to pick the bottom, as I learnt last time, is that when fixed rates start to move the other way, the first move up might be a big one.
Eg. It might settle at 5.5%, but then the next move up might be straight to 6.25%, and your main lender might be the first bank to start the upwards moves.
So, that said, we should try not to be too greedy, and when an acceptable 5.x% rate looks us in the face... take it!
Interested in others' thoughts...
Sash..
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The real question is if you fix for 3 years at sub 6% what are the rates going to be like when you come off your fixed rate in 3 yers time.. Given the amount of quantitative easing that has happened there may be decent inflation at this time and interest rates could be significantly higher.
That's why I bit the bullet and fixed for 5 years with CBA at 6.74% (6.89%-.15% wealth package). 5 year rates don't seem to be falling that fast.
That's why I bit the bullet and fixed for 5 years with CBA at 6.74% (6.89%-.15% wealth package). 5 year rates don't seem to be falling that fast.
Over the last 15 years I've noticed the peak/peak bottom/bottom cycles tend to go in approximately 3 year cycles ... the last bottom was just under 3 years ago.
I'm still sitting with a couple at 5.19% ... coming off April 2012.
I see what you're saying Ajax (and this was the argument that was heavy on our minds in the last interest rate cycle in these Somersoft threads), but I think that what we know for sure now is that no-one really has any clue as to what the interest rates are going to be like in 5 years time.
It could be higher, or it could be lower...
People who fixed for 5 years last time I don't think benefited that much, given that we are around the three year mark now since then, and rates are already going back down again.
A low 3 year fix gives you a certain outcome for the next 3 years that can give you cash flow positivity or cash flow neutrality, that's a great weight off your shoulders if you're negatively geared, and I would rather have this now and deal with whatever happens to interest rates in 3 years time then...
That's my line of thinking, but happy to hear what others think...
No. Remember what happened last time when world banks stopped lending to each other and credit dried up? The RBA can drop as many times as they like but if the banks are paying more for their $ they cannot pass on the cuts & maintain their arbitrage. I think that the last figure i read was 40% of Au bank money is still sourced offshore. Cost of funds could increase to our banks despite their AAA rating.
Good replies JLT and lizzie.
I suppose my debt recovery work in 1990 preparing statements of claim with bank interest rates at 18% and default interest rates at 27% per annum is deeply ingrained in my psyche.
Its a bit like convincing someone who lived through the depression that the world is an abundant place and they no longer need to watch every penny.
I suppose my debt recovery work in 1990 preparing statements of claim with bank interest rates at 18% and default interest rates at 27% per annum is deeply ingrained in my psyche.
Its a bit like convincing someone who lived through the depression that the world is an abundant place and they no longer need to watch every penny.
Ohhh yea I fixed some at 6.2 though the balance is still on variable. Sub 6 would fix it all I think. Net cashflow would be significant.
I take it you didn't fix last then JIT if you're free and ready to pounce now should they hit your desired sweet spot
That 4.99% didn't last too long from memory ( a week or two).
Actually I did fix ~50% of my borrowings for 3 years (in the mid 6's), but broke one a few months ago with Bankwest and one just now with NAB for a few grand, relatively small break costs overall, so I was lucky to get out of these fixed rate loans and am now 100% variable, will hopefully try to time it better this time round.
