5 year fixed rate under 5.00%
- Thread starter Marty McDonald
- Start date
That's my thinking ..
Everyone was surprised by the sub 5 , 5 years , so IF it runs out and it jumps back up . 3 years rates around 5.6
Also I don't necessarily want to spend all my time watching rates , and what if the change occures while I'm on holidays ...
Cliff
Yes . I'd like a six year rate below 5 % , but that's not what's on offer at the moment ......
Did we get notice that the five year rates were going to go under 5 % ? My recollection is that most were surprised .
Cliff
So what are your thoughts on the 4.99% "limited quantity cheap borrowing" concept - do you think rates will go back up to 5.6+% when this money runs out then slowly decline with rate cuts / expected RBA rate stability?
Not that my view counts for much but I'd say that this time next month, another set of data showing a rise in unemployment will have the 'experts' calling another rate cut in the near future.
A strong AUD and a strong trend in increasing unemployment is something I would not want to bet against by fixing at the moment.
I don't thing anyone is suggesting fixing as a Bet . It's a risk management exercise .
Cliff
that's a problems rolf . How does the average punter know who to listen too ?
are you right 100 % of the time ?
I know I'm not .. 99 % maybe
I know the average economist certainly isn't . Recently it seems sentiment over the economy swings on a monthly basis , unless your Bayview , in which case it's always pessimistic .
Cliff
that's a problems rolf . How does the average punter know who to listen too ?
are you right 100 % of the time ?
I know I'm not .. 99 % maybe
depends if its a spousal thing.............
im usually at much less than 50 %
sub 5 % fixed for 5 was pretty predictable.............in my view
I know there are different views as to pricing mechanisms etc ....... but the declining economy vs increasing equities means that people managing Other peoples money need an increasing amount in cash short to middling term, vs growth assets of various sorts.
Long and short, they would rather have late 3s guaranteed vs x with capital loss at risk.
many wont agree with either my logic nor my concept of pricing, but it doesnt matter, peops need to make their own call on what rates look like doing.
ta
rolf
Listen to the market. It's dictated by the best brains that manage trillions of $$ so they have the most to win/lose. The market says no rise in rates for 18 months... and a cut is far more likely.
I'm happy to watch this graph change every week - I'm 90%+ sure that it will give me a 6yr fixed rate below 5%, and even if the 5yr rate does go up unexpectedly, based on past experience it's likely to go up by only a few bps before it really increases. I reckon you should be guided less by your fears and more by your dreams.
As an aside, I noticed yesterday that someone predicted a 0% cash rate by 2016! However, I'd be v. surprised it that happened.
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If its simply a risk management excercise then you dont have to pick the bottom, you can fix wherever you like.
I think you will find many contributers here are trying to pick the bottom, and if you read back through the earlier posts on fixed rates, many of them are successful. They are the 20% when the other 80% 'lose' when fixing their rate.
The 5year fixed money will run out at some point, however the banks will decide to pull the offer well before, when the financial market chatter deems it so.
When you have multiple millions in borrowing , a degree of logic and appropriate risk management is also appropriate
The amount we are looking at fixing is around 20'% of our total current borrowings.
Cliff
RBA cash rate history from 1990
What do you mean by 'limited quantitiy'...an issue with the supply of credit in funding markets?
Interesting chart - convenient starting point. Inflation targetting has a big role in anchoring expectations - implied in the lower volatility in the cash rate over recent years (compared esp to the 70s).
Yep - thats all they do have on their website. Quick google search and you'll be able to find older rates, noting that DMO was done differently back in those days and you'll find large variances in month to month interbank rates.
I'm not sure theres any merit to pointing to a downward trend from 1990. There was a structural shift in interest rates once inflation targetting anchored expectations.
Looking at charts since those structural adjustments (post 1994) in monetary policy design, there isnt a real obvious structural trend in declining interest rates.
Movements in the cash rate today are far more cyclical, with no real structural declining trend. If there is, it relates to structural shifts in the economy.
I completely agree with you that the days of 10% rates are gone - but those days havent been around for 2 decades.
http://www.abc.net.au/news/2013-07-31/jericho-big-graph-1/4854038
I'm not sure theres any merit to pointing to a downward trend from 1990. There was a structural shift in interest rates once inflation targetting anchored expectations.
Looking at charts since those structural adjustments (post 1994) in monetary policy design, there isnt a real obvious structural trend in declining interest rates.
Movements in the cash rate today are far more cyclical, with no real structural declining trend. If there is, it relates to structural shifts in the economy.
I completely agree with you that the days of 10% rates are gone - but those days havent been around for 2 decades.
http://www.abc.net.au/news/2013-07-31/jericho-big-graph-1/4854038
I'm not so sure you can put the decline down to the rba's inflation mandate solely.
