Can Fixed Rates go any lower ?

Discussion in 'Property Finance' started by keithj, 4th Jun, 2015.

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  1. keithj

    keithj Member

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    The banks response to APRA is to reduce discounts on variable rates. Will they reduce discounts on fixed rates too ?

    And O/S bond yields look like they are rising - is that likely to increase fixed rates here ?

    It looks to me as though fixed rates have bottomed & the only way from here is up..... it's just a case of When ?
     
  2. sydprop

    sydprop Member

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    I'm leaning to similar thinking.

    Of course, many don't think you should fix but I'm yet to see an argument against it if rates increase - thus no break fee.
     
  3. Syd Investor

    Syd Investor Member

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    I agree. I work for a bank I dont see the fixed rates going any lower. You may have a couple of 2nd tier lenders reduce slightly but I think we are at the bottom of the cycle now for fixed rates.

    Might be a time to consider fixing in a portion of your loan depending on your strategy but I would ask the brokers on here.

    Cheers
     
  4. WattleIdo

    WattleIdo Member

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    I think we've hit bottom.
    There are little pieces of good news flying around week to week. We're all on an upward swing now, just some don't realise.
    Also, most of us don't think it would be a good idea to keep cutting - not good for confidence and only spurring on the so-called 'housing bubble'.
    When rates do start to go up - probably slowly - everyone will start looking more seriously in the regions and in the 'other' capital cities.
    That's my gypsy projection into the near future.
     
  5. unloadmymind

    unloadmymind Member

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    I've seen this happen in mid-May when the bond rout first happened and people in the market were panicking. But Oz fixed rates hardly moved. And the O/S bond rout has reversed course last night with US 10y yields going down.
     
    Last edited: 5th Jun, 2015
  6. euro73

    euro73 Member

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    Multiple lenders have already increased fixed rates in the past few weeks.
     
  7. unloadmymind

    unloadmymind Member

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    Which ones? I can still see compeitive rates sub-4.5% for 5y loans. Those who raised might have cut too deeply previously.
     
  8. albanga

    albanga Member

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    Unless ofcourse you want to sell. What happens if you fix for 5 years because you believe rates will go up and then for some reason you MUST sell.
     
  9. HiEquity

    HiEquity Member

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    I don't know the dynamics of what's moving the long term yield curves, other than US developments of course. But it's hard to see how the dynamic of lower interest rates coupled with APRA tightening on housing loans is going to change. Businesses aren't investing, there is no confidence, they are paying everything they can out in dividends instead to compete in the hunt for yield among investors. Until that changes, the economy won't move so why would IRs go up?

    And to answer the OPs question, yes fixed and variable rates can go lower. Whether they will or not is the real question!

    Whoever answers this question correctly will obviously make a lot of money. Myself, I've been burnt too many times by fixed rates to make the leap now - and I no longer need to like I did previously just from a risk management perspective.
     
  10. unloadmymind

    unloadmymind Member

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    If your really need to fix, do it now.

    US is about to raise rates, US bond yields are rising again as we speak. Based on the payroll report just released and the wage growth they are seeing recently, it looks like the Fed will raise in September as widely anticipated.


    Variable rates are a different animal though. It will remain low for a while, with a some expectations of a further rate cut.
     
  11. twodogs

    twodogs Member

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    amp 5yr is up 2 weeks ago
     
  12. unloadmymind

    unloadmymind Member

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    And so did mebank. But I noted they cut too deeply around a time when bond markets are being sold off and swap rates used for pricing fixed loans have gone up. There are those banks who didn't cut too much during the time when swap rates went really low (while at the same time the variable rates were steady because of RBA's inaction in 2014) and pocketed some fat fixed rate margins, and when the RBA cut rates in 2015 these banks cut the fixed rates too as a psychological market pricing tool, despite the fact that wholesale variable and fixed rates can go opposite directions.
     
    Last edited: 6th Jun, 2015
  13. Deltaberry

    Deltaberry Member

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    We are at bottom I think. Either sell your properties now or fix your loans.
     
  14. Marty McDonald

    Marty McDonald Mortgage Broker Syd

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  15. redwing

    redwing Progress Not Perfection

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    How did Aussie corporate and government bonds react?
     
  16. unloadmymind

    unloadmymind Member

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    similarly. Remember, our domestic deposits are insufficient to cover our banks' funding. We have to borrow a lot of money overseas to fund our banks' lending for mortgages etc. the RBA does not fund our banks in any major way, contrary to popular belief. When overseas costs of funding increase, our banks will find it hard to "pass on" more rate cuts.

    [​IMG]
     
    Last edited: 7th Jun, 2015
  17. unloadmymind

    unloadmymind Member

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    ...with the usual caveat that although 5-year fixed rates may be up, variable rates in 5 years' time may not follow.
     
  18. sydprop

    sydprop Member

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    Depends on the swap rates at the time - what you believe is not that relevant!

    If you are handy at excel, you can model all sorts of scenarios to see how they turn out and how it sits with your situation.