5 year fixed rates thread
- Thread starter JIT
- Start date
If what is happening in the US is anything to go by - nothing; certainly not push them up.
The problem is not the low rates; it's the access to the finance.
Because all lenders are basically closing their wallets to only the absolute best financially positioned clients, this means there are very few people around who would qualify for a decent sort of a loan, or at decent rates.
If people have work, low rates = equal more demand = higher prices.
Growth in the lower end under $500k. Until the fires I would have said the project builders in Vic could cope with this demand but now 500 homes are to be rebuilt, I cannot see the supply of trades to keep up?
And those wanting the max FHOG have only 18 weeks to get it. As policy stands.
Peter
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Very true.
Good post with informative graph. I didn't realise how much it had changed in 6 weeks.
It depends on your timeframe.
I don't see much point fixing for 3 years, as there is no big risk of super-high interest rates in the next 3 years.
However, I see more value in fixing 10 years.
If you can manage with higher interest rates, stay variable. Variable is more flexible and usually cheaper. Fixed rates is rigid but more predictable.
Cheers,
Thats a very broad blanket statement - duded compared to??
I heard recently that the banks have just secured $56bil of funds at 2-3 % fixed for 10 years. So they have the funds to loan out. What do you reckon they want to do seeing as how they are paying interest on that money right now?
Pud
Where did you that from?
With 10 year government bonds above 4%, that seems unlikely.
Why would you buy bank debt at 3% yield when you can get a gov bond for 4% yield?
I just heard it on the street so you could say it is just a rumour. I was hoping someone more knowledgable than I could shed some light on whether it is true or not, and if it is true what the ramifications could be for obtaining finance from the banks seeing as how they are (would be) flush with funds to lend out.
Or the lenders may be willing to play ball but the mortgage insurer's criteria are stricter and this cuts some borrowers out.
The banks are still very happy to lend on residential property, but just on more realistic terms. People must be very careful of using recent history bias when making their investment decisions, the last 5years was an abnormality, not the NORM.
Banks are now wising up to the fact that there is no point having mortgage insurance if the mortgage insurer goes bankrupt and cant pay out.
Personally i am very happy with the way things are progressing. A more sensible lending environment actually adds to the stability of property as an investment asset.
And also makes it much harder for first home buyers to enter the market once the extra FHOG is taken away - meaning that the rental pool stays deep.
a rumour?
or a joke
the banks would love it!
Cheers,
So I take it everyone here thinks it is not true... In fact so far out there to be laughable or BS. Why?
Maybe the banks are loving it!! After all they have to source product (funds) from somewhere and pay interest on it don't they? And lend it out to us for a great profit. Our banks are amongst the most profitable in the world.
I have no evidence to back this up and just wonder why you people think it is an absurd situation. Could it be true and if so what does it mean for us plebs wanting to borrow; will this mean a 'freer' market for us?
But don't give it your time to think about it, after all it could not be true, right?
Pud
I found this article it;s written by Michael Connips of TradersCircle.
Spud
Interest Rates
I am really beginning to believe that lower RBA cash rates is really becoming a piece of fiction. At least for what it means in reality to us, as consumers.
I saw a David Jones credit card statement the other day. And the interest rate was 24.99% - ouch. A quick look at a Credit Card website shows that rates average around the 18% mark, plus annual fees, plus late fees, plus overlimit fees, plus plus plus.
An advertisement in the paper today announced that the current margin lending rate from a large lender being 8.7%. So for the investor to make a profit you would need to make an investment return well greater than 8.7%. You are absolutely guaranteed to pay 8.7%, but the return on your investments is not (obviously). Having surplus cash to invest is one thing, but to borrow to invest has some large hurdles to it.
For large institional investors, you are able to insure for credit defaults. The cost of insuring against Great Britain defaulting is 1.45% per annum for 5 years. The cost for the US (.80% pa), Germany (.65% pa), Japan (.76% pa), and Ireland is 3.51%. And for a large Corporate like European steel maker Arcelor Mittal, whose last balance sheet shows $67 B in assets, and a credit rating from Standard and Poors of BBB+, the cost of credit insurance is 8.6% pa. Don't forget that the cost of insurance is on top of the cost of borrowing.
We really need to focus on the reality of the true cost of debt outside of the protected variable home loan rate.
Even the Commonwealth Bank issued 3 year fixed rate debt (non-guaranteed) last Thursday at effectively 1.9% above the Government bond rate, or at 4.9% fixed for 3 years. We have been waiting for Mortgage fixed rates to come close to the current 5.25% variable rate, but if the CBA is paying 4.9%, the cost to the home owner will be 6.9%.
Anecdotely, the easiest form of finance to get is for home loans, but the loan to value ratio needs to be south of 80%. And the best way to get a business loan is to secure it with property. Most other forms of finance is proving difficult to obtain.
The Government will continue to support the politically sensitive housing sector with grants and low variable RBA cash rates. With the Tsunami of long-term Government debt from countries, including Australia, hitting the debt market, the prudent approach to your debt management may be to lock in fixed rates, but waiting for them to drop a lot further may result in disappointment.
Spud
Interest Rates
I am really beginning to believe that lower RBA cash rates is really becoming a piece of fiction. At least for what it means in reality to us, as consumers.
I saw a David Jones credit card statement the other day. And the interest rate was 24.99% - ouch. A quick look at a Credit Card website shows that rates average around the 18% mark, plus annual fees, plus late fees, plus overlimit fees, plus plus plus.
An advertisement in the paper today announced that the current margin lending rate from a large lender being 8.7%. So for the investor to make a profit you would need to make an investment return well greater than 8.7%. You are absolutely guaranteed to pay 8.7%, but the return on your investments is not (obviously). Having surplus cash to invest is one thing, but to borrow to invest has some large hurdles to it.
For large institional investors, you are able to insure for credit defaults. The cost of insuring against Great Britain defaulting is 1.45% per annum for 5 years. The cost for the US (.80% pa), Germany (.65% pa), Japan (.76% pa), and Ireland is 3.51%. And for a large Corporate like European steel maker Arcelor Mittal, whose last balance sheet shows $67 B in assets, and a credit rating from Standard and Poors of BBB+, the cost of credit insurance is 8.6% pa. Don't forget that the cost of insurance is on top of the cost of borrowing.
We really need to focus on the reality of the true cost of debt outside of the protected variable home loan rate.
Even the Commonwealth Bank issued 3 year fixed rate debt (non-guaranteed) last Thursday at effectively 1.9% above the Government bond rate, or at 4.9% fixed for 3 years. We have been waiting for Mortgage fixed rates to come close to the current 5.25% variable rate, but if the CBA is paying 4.9%, the cost to the home owner will be 6.9%.
Anecdotely, the easiest form of finance to get is for home loans, but the loan to value ratio needs to be south of 80%. And the best way to get a business loan is to secure it with property. Most other forms of finance is proving difficult to obtain.
The Government will continue to support the politically sensitive housing sector with grants and low variable RBA cash rates. With the Tsunami of long-term Government debt from countries, including Australia, hitting the debt market, the prudent approach to your debt management may be to lock in fixed rates, but waiting for them to drop a lot further may result in disappointment.
NAB adjusts their fixed rates
At least matching the market leaders now in most time frames...:
Hoping the formatting survives. 5.99% for 4 years is sounding alright to me now...
Fixed rate changes Standard Rates Choice Rates
1 year 5.09% 4.99%
2 years 5.19% 5.09%
3 years 5.29% 5.19%
4 years 6.09% 5.99%
5 years 6.29% 6.19%
10 years 7.09% 6.99%
1 year intro 4.79%
3 year intro 4.99%
At least matching the market leaders now in most time frames...:
Hoping the formatting survives. 5.99% for 4 years is sounding alright to me now...
Fixed rate changes Standard Rates Choice Rates
1 year 5.09% 4.99%
2 years 5.19% 5.09%
3 years 5.29% 5.19%
4 years 6.09% 5.99%
5 years 6.29% 6.19%
10 years 7.09% 6.99%
1 year intro 4.79%
3 year intro 4.99%
I've been watching this rate too. No one even coming close at the moment. We're cosy with Westpac with our offset account, but considering this and a split loan with Rams.
Anyone know if Rams has offset and visa/mastercard?
I hope the westpac rates come down to match, aren't they owned by westpac??
HIya Dan
Nah, no offset .................
ta
rolf
Nah, no offset .................
ta
rolf
At least matching the market leaders now in most time frames...:
Hoping the formatting survives. 5.99% for 4 years is sounding alright to me now...
why? since rates are not going up in the short term, why would you fix?
If anything they are talking a further 100pts drop before the bottom is reached..
Better to ride this one out, and fix on the first step up increase.
You are braver than I, crc_error. Some of us are just happy to bank on being able to fix below the historical average. Plus the cost of long-term funding seems to have affected the banks' ability to drop fixed rates anywhere near variable. If this situation doesn't improve, it's possible that the "bottom" in the SVR bears less resemblance to that of fixed rates, especially 5yrs+.
If I was a bank I would be tempted to raise fixed rates as soon as the variable turns back up, in order to charge for the surety of fixing. At that stage we'll have to take whatever we can get (a situation I'd rather not be in). Of course, none of this may happen but I'd rather play it safe.
If I was a bank I would be tempted to raise fixed rates as soon as the variable turns back up, in order to charge for the surety of fixing. At that stage we'll have to take whatever we can get (a situation I'd rather not be in). Of course, none of this may happen but I'd rather play it safe.
