5 year fixed rates thread

JIT

JIT

Hi there,

Anyone else keeping an eye on 5 year fixed rates?

I am!

I'm not really interested in longer term rates (6+ years), too long for me...

So, when will 5 year fixed rates bottom?

If someone could give me a heads up when this is about to happen that would be great :D.

Looks like Bankwest is still the lowest at 6.69% pa for 5 years as of today.

Will be interesting to see what happens in the next week or so...
 
G'day Jit,

When Fixed and Variable swap places, then is the time....

This, I believe - but I'm always willing to be convinced by better argument,

Regards,
 
what are the normal rate cycles? ie, from bottom to top then back to bottom? i suspect they are around 5-6 years in length - 2003-08; 1999-03; 1989-94 etc - so 5yrs would probably be the right length of time to fix imo.
 
lizzie said:
what are the normal rate cycles? ie, from bottom to top then back to bottom? i suspect they are around 5-6 years in length - 2003-08; 1999-03; 1989-94 etc - so 5yrs would probably be the right length of time to fix imo.
Click to expand...

I'm wondering about this also Lizzie as my bank offers 100% offset on fixed loans, but they only offer 5 years fixed, nothing longer. Five years could find us at the top of the next cycle with a few years of high variable rates.

On a slightly different topic, Margaret Lomas on Monday night said she has never fixed rates, on the belief that when you fix the rate is higher than the current variable, and by the time you've made up that "loss" you are out of your fixed term. Personally I don't believe this and would appreciate others opinions.
 
As others have said before, you fix to have predictable repayments, not to outsmart the system.

kaf
 
MarkandTina said:
On a slightly different topic, Margaret Lomas on Monday night said she has never fixed rates, on the belief that when you fix the rate is higher than the current variable, and by the time you've made up that "loss" you are out of your fixed term. Personally I don't believe this and would appreciate others opinions.
Click to expand...

Fixed rates can often be lower than variable. What she is saying factually incorrect. People can and do beat the system but it's an art form. Very few are masters at it. I think I get about 80% of mine right and in recent times they prevented me from hitting the wall.
 
Thanks GoAnna

I just did some quick calcs based on fixing for 5 years at 6.5% vs the following estimated average annual interest rates:

year 1: (2009) 6.0%
year 2: 7.0%
year 3: 8.0%
year 4: 9.0%
year 5: 10.0%

If I fix for those 5 years I break even i.e. rent + tax breaks = mortgage payments, if I stay variable it costs me 30k over the 5 years.
 
kaf said:
As others have said before, you fix to have predictable repayments, not to outsmart the system.

kaf
Click to expand...

Well said Kaf, exactly correct. Fixing rates is NOT about whether rates are going up or down!

Only the inexperienced glass half empty thinkers, think it is. ......and as we all know if they're focusing on what they haven't got, guess what they will get a whole lot more of.

The experienced investors (of any asset class) know investment is all about maximising cash flows and minimising risks. Fixing rates is one of many tools available for minimising risks and applied in this context, is used to insulate ones self from both present and future ecomomic climate/conditions that may prevail.

Success is 80% Mindset x 20% Strategy.

Food for thought.
 
Last edited:
kaf said:
As others have said before, you fix to have predictable repayments, not to outsmart the system.

kaf
Click to expand...

I agree. This article sums it up nicely, including a nice profit/loss graph showing you you'd have been worse off fixing about 90% of the time in the past.

http://www.prosolution.com.au/news/past-newsletters/aug05.pdf

Your call
The fixed versus variable decision is a very personal one. I guess there is no right or wrong decision – it just depends on your personal situation.

The only thing I would caution you on is fixing for the sole reason of thinking you will be financially better off – you might be, but it’s unlikely.
Click to expand...
 
Not being an "experienced" investor I am obviously missing something here.

My calcs tell me that if I fix at 6.5% and my estimates of average interest rates for the next 5 years are correct, then I will save myself $30,000.

I have read the pdf referenced above and understand that many people fix at the wrong time, i.e. when they fear rates will rise to the point where making payments is an issue. In fact, when I was borrowing for my IP my loans officer took out a fixed loan at the same time, and obviously got it wrong.

What I am failing to see is how I lose by fixing when interest rates are at their lowest value.

$30k is $30k I'm not trying to outsmart anything, I am simply trying to save a bundle of cash, and that paper unfortunately doesnt shed any light on what I'm getting wrong.
 
GoAnna! said:
Fixed rates can often be lower than variable. What she is saying factually incorrect. People can and do beat the system but it's an art form. Very few are masters at it. I think I get about 80% of mine right and in recent times they prevented me from hitting the wall.
Click to expand...

I agree GoAnna, I will fix my rates when I believe it represents better long term value, (nothing to do with stability of repayments) and am more often than not well in front. I have a 3 yr fixed rate coming off in Mar 09 which was locked in at 6.34%. I'll probably re-fix a fair proportion of it at that time too.
 
MarkandTina said:
Not being an "experienced" investor I am obviously missing something here.

My calcs tell me that if I fix at 6.5% and my estimates of average interest rates for the next 5 years are correct, then I will save myself $30,000.

I have read the pdf referenced above and understand that many people fix at the wrong time, i.e. when they fear rates will rise to the point where making payments is an issue. In fact, when I was borrowing for my IP my loans officer took out a fixed loan at the same time, and obviously got it wrong.

What I am failing to see is how I lose by fixing when interest rates are at their lowest value.

$30k is $30k I'm not trying to outsmart anything, I am simply trying to save a bundle of cash, and that paper unfortunately doesnt shed any light on what I'm getting wrong.
Click to expand...

When you figure out how to predict when IRs are at their lowest value for the next 5 years let us know.
 
Basically fix for peace of mind but probably also has a lot to do with buying property in 86 and watching the rates rise to over 17%.

Does anyone remember when the govt step in (or was it the banks) and introduce the cap system of 13.5% for the first 50K for those who bought before a set time in 86?

One of my loans is coming off a fixed for 3 years at 6.5% next March. Would be interested in knowing if fixing 3 years ago has been better off than if I had left it variable. Any one good at figures able to provide the answer?
 
Y33 said:
Basically fix for peace of mind but probably also has a lot to do with buying property in 86 and watching the rates rise to over 17%.

Does anyone remember when the govt step in (or was it the banks) and introduce the cap system of 13.5% for the first 50K for those who bought before a set time in 86?

One of my loans is coming off a fixed for 3 years at 6.5% next March. Would be interested in knowing if fixing 3 years ago has been better off than if I had left it variable. Any one good at figures able to provide the answer?
Click to expand...

For memory it was 1987


oooops
was April 1986. refer page 19 of link

http://www.rba.gov.au/PublicationsA...uiry_into_the_australian_banking_industry.pdf
 
Last edited:
Hoffy,

Thanks, good link.

Bradsdad,

Definitely 86 as I made it by about 1 week before they jumped to 15.5%. Also in the link that Hoffy provided.
 
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