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Is it time to fix now?

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by Peter Switzer

I have been watching your views on interest rates and you seem to think there is one more cut to go, but what about fixed rates. Is it time to fix now?

I think the variable rate could fall one more time but I would not be surprised if the cutting cycle is all over. Of course, if the Reserve Bank (RBA) cuts, then the banks will pass it on because funding costs have fallen, but we’re now seeing bond yields rise right around the world and it’s this professional funding market where they talk about things like swap rates, which I won’t explain here, that have more impact on a bank’s fixed rate. John Symond of Aussie Home Loans recently pointed out that these swap rates could spike 40 basis points or 0.4% in one night, and this means fixed rates could rise when the variable rate here is falling. I think the UBank five-year fixed rate of 4.96% — and that’s the comparison rate — is a beauty and looks very attractive for anyone who knows he or she will stick with the property for five years. One thing, if you decide to break the loan say after three years, there will be a cost, so ask what the fee will be so you know what you are getting into.

Published on: Thursday, September 05, 2013

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