5 year fixed rate under 5.00%

From CBA this morning.

"We are pleased to advise we have reduced our 5 Year Fixed Rate home loan to a competitive rate of 4.99% p.a. (comparison rate 5.62% p.a) under MAV".

Wow that says something about the yield curve being very flat. As always fixed rates should be considered with caution due to potential break costs.
 
It's pretty amazing and it'll be interesting to see what the other banks do. I've got a property with CBA that I have no plans for in the foreseeable future and I'm considering fixing it.

That said, 5 years is a long time to loose some flexibility regardless of how good the rates are.
 
Now that's a difficult one. A competitive 5 year fix, which requires quite a long term commitment, but at a very cost effective price.

You wouldn't want to lock in your whole portfolio into this, but a portion that you were looking at holding long term (and whilst having others you could offload in adverse circumstances) makes for a strong offering.
 
That said, 5 years is a long time to loose some flexibility regardless of how good the rates are.

That's the issue - five years (IMO) is too long to commit to a fixed loan, even if the intention is to set and forget as plans can change - and five years is a long time.

Cheers

Jamie
 
Surely if the CBA is fixing at that rate then they expect variable rates to be lower than that? ... as per the "house always wins" rule of thumb.

Or am I (yet again) showing my naive?
 
I understand this has been asked.
If you're on lower fixed 5yrs rate say 4.99%, and 3yrs down the track you want to sell. The variable is 5.99% at the time you want to break.

What would be approx break out fee?
 
Surely if the CBA is fixing at that rate then they expect variable rates to be lower than that? ... as per the "house always wins" rule of thumb.

Or am I (yet again) showing my naive?

That's not how it works. The CBA has been able to buy some money at a (very) cheap price, they're passing it onto the consumers after applying their margin.

The CBA isn't making a prediction, when you fix a loan they lock in their profit regardless of what happens. Fixed rates may be an indicator of where the bond markets expect rates to go, but it's not the bank using their crystal ball.


That's the issue - five years (IMO) is too long to commit to a fixed loan, even if the intention is to set and forget as plans can change - and five years is a long time.

That's my only concern. What if our plans change? We bought the property late last year and don't expect to touch it for at least 5 years (not even for a top up), but Murphy's Law tends to get in the way when you least need it. 4.99% would essentially guarantee it's cash-flow neutral (if I ignore those ridiculous Brisbane council rates).
 
Haha I recall a fair few people waiting to see 5YR @ <5% now that it's hear, it's still scary as it's 5 years.

I don't have any loans/properties suitable for that, but going to be interesting in 6-12months time when I do if the rate is still around.
 
Haha I recall a fair few people waiting to see 5YR @ <5% now that it's hear, it's still scary as it's 5 years.

I don't have any loans/properties suitable for that, but going to be interesting in 6-12months time when I do if the rate is still around.

Certainly possible that rates will go lower so Id hang out for shorter term rates to fall.

But it's still hard to beat variable over long term and with complete flexibility.;)

5 years is a very long time.
 
That's not how it works. The CBA has been able to buy some money at a (very) cheap price, they're passing it onto the consumers after applying their margin.

Seems NAB has just stumbled upon the same provider...or are they just chucking in a bit of profit to gain business?

Lets see the other 2 of Big 4 responses....
 
Say hypothetically, if someone wants to get out from the fixed rate in 3 years time and at that time, the interest rate has gone up by 2%. Would they still incur a breakout cost?
 
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