RAMS 10 yr from 6.19 to 7.09!!
- Thread starter Ms Jade
- Start date
Noooo! What is 5 year?
dont we love our rate locks 
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Everyone needs to take a chill pill regarding fixed rates. Variable rates aren't doing anything but staying the same or going a touch lower for at least the next 12 months.
Why would you want to lock yourself into a rate that is over 1 to 1.5% higher than current discounted SVR for at least 12 months? Rates would have to spike significantly in the remaining last few years of your loans to make the decision pay off financially.
Why would you want to lock yourself into a rate that is over 1 to 1.5% higher than current discounted SVR for at least 12 months? Rates would have to spike significantly in the remaining last few years of your loans to make the decision pay off financially.
Agreed re: SVRs going nowhere but down. Actually, I expect fixed rates will probably go down too, but probably not for a while. It will take liquidity returning to the credit market, which will return (eventually) and long term funding will be more plentiful without such a premium. The reason I lock in is not to beat the SVR but so I have the surety of knowing what my repayments are over the long term. The loans I fix are only for 5 yrs +. I have only fixed 1 for 10 yrs because I have a lot of exposure & we've had historically low long term rates - until today, anyway.
Hiya Buzz
One solution isnt for all problems
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One solution isnt for all problems
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Hiya Buzz
One solution isnt for all problems
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True.
However the common link that goes through all threads for fixed rates is a financial one. If it was non-financial (eg SANF), why wouldn't you fix now?
Agreed.... there are three occasions when you'd want to fix rates for non-financial reasons -
- Fear of rising variable rates - This is what some did this time last year. Variable rates looked like rising beyond some peoples capacity to pay, and would wipe them out. So the obvious solution was to fix & survive & endure the longer term consequences. This is late risk management, better than nothing (just).
- SANF - to keep interest payments known. Doesn't matter if fixed rates are high or low when you fixed... the point is that they are known & locked in. By fixing at any time volatility is reduced, SANF is increased, it's a lot easier to take on other risks because the risk of higher IR payments is eliminated.
- Historically Low Fixed rates - When fixed rates are at or close to historic lows & look like they can't go any lower, it's likely to be at least at the financial break even point, so fixing isn't likely to cost anything over the term. By fixing at low points, you get the above advantages plus you're more than likely to be better off financially.
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Stop making sense!!
I agree with your comments, yet a lot of people seem to be on some sort of "missile lock" when it comes to fixed rates. I don't get it.
I get your point. But if you have $2m in loans even a 1% increase in rates requires you to find an extra $20,000 p.a. in interest. I'm sure many of us have at least this much exposure to the market, and the finance market is like any other = a gamble if you don't have insurance. Those of us who are highly geared (against income, I mean - not necessarily LVR) might not be in a position to afford rates to rise by 2-3%. I certainly would be in some pain!
Being in this position is an inherently risky proposition that can can be addressed through fixing. The added pain right now is that you're going to be paying over that $20k p.a. for the fixed premium (which is why my recent loans are staying variable for now).
BTW, I think that 7.09% is a pretty good 10 yr rate. You can get 6.79% elsewhere, I think. Just think how many people would have jumped on that if it was offered 12mths ago. Now it suddenly looks expensive! We tend to have short memories with these things & I don't think it serves us for the long term.
buzzlightyear said:
Westpac Economists seem to think further RBA rate cuts are unlikely to be passed on - only the banks will benefit through increased margins.
I'd guess the banks will increase their variable rates in line with cash rate increases, but as Westpac says, they are less likely to drop in line with the RBA. The markets are currently expecting the cash rate to fall by 0.5% within 6 months, then rise by ~1% within a further 12 months. That adds up to ~1% increase in the standard variable rate within 18 months from todays SVR. There's v. little competition from those non-bank lenders these days to keep them in check.
Can we expect some competition from these second tier lenders then, it would be a good time for them to come out and pick up some valuable customers
realistically, I would expect some of the larger non banks may be able to do something with the fixed rates, but low volume purchasing may get in the way for the smaller guys.
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