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Fixed interest rates; Are they likely to get lower?
Topic Started: 29 Sep 2014, 11:23 AM (1,274 Views)
Frank Castle
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Business As Usual

Crystal balling I know but I have some loans coming off of 4.99 early next year and had a letter front on Friday offering same rate and term again if signing now.

Why do they want me to sign now and not closer to the day they comme off........do the banks see them dropping lower?
I find it hard to believe they would actually have my best interests mind.

Thoughts
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peter fraser
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Frank Castle
29 Sep 2014, 11:23 AM
Crystal balling I know but I have some loans coming off of 4.99 early next year and had a letter front on Friday offering same rate and term again if signing now.

Why do they want me to sign now and not closer to the day they comme off........do the banks see them dropping lower?
I find it hard to believe they would actually have my best interests mind.

Thoughts
You can get 4.63% or 4.65% variable with a number of lenders especially if total loans exceed $1M. You will have to ask though, it's not a standard rate.


Hard to say what the future holds but as a rule of thumb if you don't know fix half and let the other half ride on variable.
Any expressed market opinion is my own and is not to be taken as financial advice
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Frank Castle
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Business As Usual

peter fraser
29 Sep 2014, 11:31 AM
You can get 4.63% or 4.65% variable with a number of lenders especially if total loans exceed $1M. You will have to ask though, it's not a standard rate.


Unfortunately we dont have that much with any one lender anymore.
We pushed enough to get a full 1% off variable but they wont play the game on fixed so they say.

Quote:
 
Hard to say what the future holds but as a rule of thumb if you don't know fix half and let the other half ride on variable.

There is that and it lets us bang down more debt on those loans as well.
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b_b
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Frank Castle
29 Sep 2014, 11:23 AM
Crystal balling I know but I have some loans coming off of 4.99 early next year and had a letter front on Friday offering same rate and term again if signing now.

Why do they want me to sign now and not closer to the day they comme off........do the banks see them dropping lower?
I find it hard to believe they would actually have my best interests mind.

Thoughts
Banks (as a collective) have no idea where interest rates are heading. Their economics team change with the wind. Their strategy teams often conflict with their economics teams.

As a business, Banks simply match duration where they can (i.e.: they follow the fixed interest market). At the moment term funding looks low, so they can match loans with an attractive sticker price.

I suspect the reason they are reaching out to you now is because of competition. They do not want to lose your loan. The one competitive advantage they have is they know your loan term, so they can get ahead of the competition.
Edited by b_b, 29 Sep 2014, 12:05 PM.
(S – I) + (T - G) + (M - X) = 0
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A Lurker
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Frank Castle
29 Sep 2014, 11:42 AM
Unfortunately we dont have that much with any one lender anymore.
We pushed enough to get a full 1% off variable but they wont play the game on fixed so they say.



There is that and it lets us bang down more debt on those loans as well.
I have a funny story.

I have just one PPOR mortgage with less than $500k owing. It has a redraw that takes it to nearly double that. My rate was recently 5.3% variable with discount (supposedly 0.85% but also with no fees on anything ever (i.e. transaction, application, changes, anything)). I was kind of happy as the interest doesn't amount to much anyway.

The other week, my bank sent me an email offering new customers 1% off a base of 6% (but with different other terms).

I thought, hang on that's a bit off and shot them an email that took less than 5 minutes to write. I thought I might get them down to 5.15% or something, i.e. 0.85% off the new base.

The next day they rang me and left a message on my mobile (I was in a meeting). The message was that they had looked at my account and were giving me 1.2% off base variable and the guy would tell the loans team and action immediately. The next day my internet banking showed that my interest rate was 4.8%, i.e., nearly $200 per month less interest.

I guess, if you don't ask...


Frank Castle
29 Sep 2014, 11:42 AM
Unfortunately we dont have that much with any one lender anymore.
We pushed enough to get a full 1% off variable but they wont play the game on fixed so they say.

Frank - if you really care you could get a larger facility against the properties to push you into the next discount bracket and then just leave a chunk undrawn. Additional advantage of having cash available for a building project or deposit on the next one.
Edited by A Lurker, 29 Sep 2014, 12:18 PM.
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Hello franky :bye: , thought I would throw my 2 Bob in for you frank.

You have seen me talk about interest rates for years, and been pretty spot on. In all these years picking interest rates was pretty easy and a few months ago with our dollar still hanging high and I was pretty sure we were about to get another before xmas.

But while at one stage the iron ore price was getting hammered , the dollar was holding strong, all of a sudden our dollar has finally started to drop. Now you all need to understand we we are now. We are at a stage where the fed has overpumped the stock market, as a result they are now forced to pull back the stimulus to avoid overinflating it any further. To the idiots out there, this has given the ILLUSION that the US economy is acually recovering, when its merely been overi flated with 10 trillion worth of stimulus and zero rates for six years, this bullshit was bound to have some effect eventually. So as a result , people think the US is strong , making theie dollar stronger and ours weaker. Many foreigners have placed money in our banks over the years to get a better return than zero in their own country and many have bought bank shares too. Now with the dollar falling, all these foreignors are cashing in there aussie dollars and aussie bank stocks to aviod getting smashed with the dollar falling against there own. Imagine a US investor who was holding aussie dollars and or aussie banks stocks, they would be jumping ship to aviod the dollar value loss comapred to the US dollar. This is what is causing a rush out of banks stocks, it may cause a bit of an avalanche to the down side, stay away from them for a while.

Now frank, you may have also seen me talk about when to fix yours laons over the years. I have said back as far as 2012 or even 2011 that the time to fix your rates will probably be the end of 2014. We are here now frank and i terest rates are starting to get tricky for me now, where they never have been before.

My certainty of rates falling further are starting to diminish. While on one hand I see the economy headed into further decline and for quite some time, Im not sure how the dollar will go from here. Its looking like it may keep dropping but the fed wont raise rates so things could change.

So what do you do frank, I think its time to lock in in for three or five years. Yes it may get a bit cheaper, but how much really as opposed to how much it may go up. So I would sign up now for one of these cheap fixed rates, know exactly where you stand and hope that they are still cheap when you come of this fixed loan period and then hope to lock in again dirt cheap for another few years. This is what I would be thinking of doing frank.

In the end, once the fed stimulus wears off, they will be forced to admit the economy is not yet going so welland they will not be lifting rates. They will eventually be forced to stimulate again at some stage and ourdollar could ststrengthen again.

Its still a long ride frank, I've seen some three year fixed for 4.39% .

The big decision is, to lock in for three or five ? I'm leaning on five . The reason being is this. If you make it to the five year period and rates are still cheap you can lock in again for another three or five. If in five years time, rates have gone up , then you have done the right thing by locking it in now.

Good luck frank.
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Foxy
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Zero is coming...

i always fix and it always costs me.

Peter

But so does insurance.
http://www.afr.com/content/dam/images/g/n/2/1/u/8/image.imgtype.afrArticleInline.620x0.png/1456285515560.png
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PiratePete1911
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This was a really useful thread, I feel like I have learned a little more.
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Prop Cycle
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Frank Castle
29 Sep 2014, 11:23 AM
Crystal balling I know but I have some loans coming off of 4.99 early next year and had a letter front on Friday offering same rate and term again if signing now.

Why do they want me to sign now and not closer to the day they comme off........do the banks see them dropping lower?
I find it hard to believe they would actually have my best interests mind.

Thoughts
You can always part fix - at any ratio you like. Maybe fix 70% and make 30% std variable.
Are you with Wpac?
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stinkbug
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I reckon fixed rates will be a little lower, but there'd be bugger all in it really. If I can re-fix at 4.95 in 18 months when mine come off fixed I would probably take it.
Edited by stinkbug, 30 Sep 2014, 12:01 PM.
---------------------------------------------------------------

While it's true that those who win never quit, and those who quit never win, those who never win and never quit are idiots.

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