Fixed rates are currently at a 3 year low and many borrowers are rushing in to lock in some mid to long term rates, while many others are still holding off in the hope that there will be a further drop to come. With one year Fixed rates as low 4.97% and 5 year rates from 5.50%, these represent some amazing opportunities for borrowers seeking to take advantage of this low interest rate environment for as long as they can.
While many people focus on the volatility of the variable rate and the potential for further rate reductions, many observers overlook the fact that this current low interest rate environment may only be with us for a short time, and that ultimately the variable rates will again trend upwards potentially within the next 12 months to 2 years. This is why the current longer term fixed rate look so appealing, however any fixed rate will always be a gamble, as no one has a crystal ball that can tell you firstly how low they will ultimately get, and how long they will be that low for.
It is the three and five year interest rates that I think represent great value at present, and I would be proving myself a fool to state that they will not go even lower, as no one can know this for sure, however I believe that when they do start to trend upwards, you will not be able to see it coming, and therefore now may even represent the best time to consider fixing. You see it is not the variable rate or the RBA that determines when the fixed reach the bottom and then start to trend upward, it is the financial markets that determine the longer term swap rates.
At the end of the day, what most borrowers need to consider is whether the current fixed rates represent good value to them. With the 30 year average variable rate in excess of 7%, a five year fixed rate of 5.50% represent phenomenal value in my opinion, so would definitely be worthy of consideration.
If you are unsure, then why not consider a split loan and have a finger in each pie? That way you get the advantages of a fixed rate plus the flexibility of a variable rate product that (loosely) follows the RBA movements.
If you would like to look at fixing your interest rates right now, you need to speak to one of our Professional Lending Specialists. Jon and Tammy have both been in finance for more than 15 years and have a great understanding of the market. We also have access to over thirty lenders with some great interest rates on offer at the moment that you may not be able to get from your own bank.