5 year fixed rates thread

[crc_error]

I don't think the bank will allow its customers to fix at a rate where they are going to loose money.. so I agree with the previous reference where the article says that 80% of people who fix end up worse off.

And even if you do get a cheaper fixed rate, the period of time will be to short to make it pay off.

When we can get a sub-5% 7 year fixed rate, then I would take that but I very much doubt the 7 year rate will fall that low.

 

[crc_error]

look at the current 5 7 and 10 year rates.. very expensive, why would you bother.. and this is when everyone is expecting rates to fall another 125 points.

http://www.commbank.com.au/personal/home-loans/complete-home/rates-fees/default.aspx

so what will happen when everyone expects rates to go up?

 

[tobe]

last time round I suspect they were more confident of their crystal balls. They took a big loss on all the fixed rates they did under 6%. I dont think they will make the same mistake this time.
I will be happy to be proved wrong, but I doubt we will see a major with a 5 yr fixed rate below 5%. I will be the first in line if I see it!! In the meantime, I will be fixing about half my loans for 3 years over the next 12 months, having them rolling over at diferent times (and probably diferent rates). I have to keep in mind flexibility for re financing and aligning the fixed rate with Interest only terms. Some lenders will not give a fixed rate if it extends beyond the interest only term, which means a new loan, another approval process, perhaps LMI and new lender guidelines etc etc.

 

[JIT]

Breaking news!

We have a new leader...

Bankwest at 6.19% pa fixed for 5 years!

It's almost as if Bankwest's fixed rates are compensating for their hopeless variable rates.

I don't understand why CBA still hasn't moved on their rates, 7.29% pa (after a 0.2% pa discount) fixed for 5 years...

Anyway, not long to go before we get to sub-6% pa 5 year fixed rates...

 

[crc_error]

http://www.arabbank.com.au/a-personal-loan/86

6.49% for 5 years... better than the big 4.

their savings rate is still over 7%!

 

[JIT]

http://www.arabbank.com.au/a-personal-loan/86

6.49% for 5 years... better than the big 4.

their savings rate is still over 7%!

WBC is at 6.29% pa fixed for 5 years.

 

[Nth Brisbanite]

Are there penalties involved if a property is sold within the 5 year fixed period?.

 

[Peter 14.7]

Are there penalties involved if a property is sold within the 5 year fixed period?.

Yes read the fine print.

Peter

 

[House_Keeper]

Yes, a 5 year fixed term contract has 'break cost', meaning that you pay a penalty for closing out the loan before the end of the term.

Theses penalties can be quite high.

Best not to take a 5 year fixed contract if you plan to sell the property soon.

Cheers,

 

[Peter 14.7]

Breaking news!

I don't understand why CBA still hasn't moved on their rates, 7.29% pa (after a 0.2% pa discount) fixed for 5 years...

Anyway, not long to go before we get to sub-6% pa 5 year fixed rates...

Market position, demand, risk profile, etc... all factor in what they want to offer. CBA owns Bankwest in principle so they may seel Bankwest as the risker lender for thier team? Like Qantas and Jetstar. Peter

 

[Peter 14.7]

look at the current 5 7 and 10 year rates.. very expensive, why would you bother.. and this is when everyone is expecting rates to fall another 125 points.

http://www.commbank.com.au/personal/home-loans/complete-home/rates-fees/default.aspx

so what will happen when everyone expects rates to go up?

Banks are not able to read the future. If so , in June when rates were going up they would have offered 7.5% fixed 5 years and made a killing in the rush to take it up.

I have learnt they make mistakes. The trick is to be able to act very quickly; when you lock, lock hard and dont let them muck about with checks and such.

I predict five years around 5.1% Easter next year. Easte to June willbe the sweet spot. It the GFC does not start to show signs of levelling by June we have bigger problems than locking our rates.

Peter

 

[Peter 14.7]

Yes, a 5 year fixed term contract has 'break cost', meaning that you pay a penalty for closing out the loan before the end of the term.

Theses penalties can be quite high.

Best not to take a 5 year fixed contract if you plan to sell the property soon.

Cheers,

This is very good point Housekeeper and good to see you posting mate.

Dont fix if you have as trong liklihood of selling in the period.

Whilst rules on break costs in theory mean should the rates go up you dont pay out , read the fine print as the Banks like to get you either way. They argue they bought the $ in the market of 2008, so when you sell in 2010 that hurts them, etc.. And exit fees and early discharge admin charges.

Who would be an investor Peter 14.7

 

[Nth Brisbanite]

Another couple of disadvantages of fixing for 5 years are:

• Offset accounts are not permitted by some banks
• No extra repayments allowed

 

[buzzlightyear]

Low 4%'s - even a 3 year rate would be good!

I will be cash flow neutral with an average interest rate of 5.67 across the portfolio, but any movements further down make a hige difference.

At 5% I am ~$1800 pcm cash flow positive, at 4.5% that goes to ~$2700pcm. I am looking at 5 year fixed like others, but even a 3 year rate in the low 4%'s might be too tempting, even if in 3 years I come out as rates are increasing.

 

[JIT]

Another couple of disadvantages of fixing for 5 years are:

• Offset accounts are not permitted by some banks
• No extra repayments allowed

See this thread on fixed rate loan restrictions:

http://www.somersoft.com/forums/showthread.php?t=47349

 

[virgo]

Fixed rate

Hiya

This morning i fixed half my loans with Westpac at 4.99%. That gives me flexibility viz a viz i get to retain the offset account for the other half of my variable loan.

Also, FYI westpac allows $15,000 extra to be paid off the fixed portion within the 3 years....ie on top of paying off my variable portion....

All's good, i prefer certainty of cash flows at this stage; others may be holding off for a low 5 year rate but for me 3 years is good enough.

Cheers
jennifer

 

[HiEquity]

I'm hanging out for the ten year rates to drop - it may take a bit longer for them to get a five in front but I reckon it will flow through sometime early to mid next year... they don't yet reflect the usual premium for the longer duration but that margin should hopefully come back in that timeframe. It would be cheap insurance - here's hoping!

 

[keithj]

I'm hanging out for the ten year rates to drop - it may take a bit longer for them to get a five in front but I reckon it will flow through sometime early to mid next year...

I'd be surprised if 7-10yr rates had a 5 at the start (even low 6's). Longer term rates tend to cover a whole cycle, so an average rate for a full cycle is what you're likely to pay - 7-8%.

OTOH, 1-5 yr rates cover only part of the cycle, so they vary a lot more depending on where we are in the cycle.

 

[HiEquity]

I'd be surprised if 7-10yr rates had a 5 at the start (even low 6's). Longer term rates tend to cover a whole cycle, so an average rate for a full cycle is what you're likely to pay - 7-8%.

OTOH, 1-5 yr rates cover only part of the cycle, so they vary a lot more depending on where we are in the cycle.

Agreed - it would be a nice surprise! However 10 year rates in the low sixes have happened before at a time when variable rates didn't go as low as ours are looking to go right now - and general sentiment was better then too (none of this "global" stuff and multiple 100 basis point drops!).

So I wouldn't discount the possibility but it will take time to work through... I just want to get out ahead of the wave of high inflation that will no doubt come as a result of all these low rates around the world. Central banks are always too slow to raise later for fear of "stalling" the recovery...

 

[keithj]

Agreed - it would be a nice surprise! However 10 year rates in the low sixes have happened before at a time when variable rates didn't go as low as ours are looking to go right now - and general sentiment was better then too (none of this "global" stuff and multiple 100 basis point drops!).

So I wouldn't discount the possibility but it will take time to work through...

Sounds good to me .... have you got a link for the low 6's 10yr rates ? or even 5+yr fixed rate stats ?