Fixed or Variable what do people think?

With the current economic position what are peoples thoughts on the market. To fix or stay variable?

Cash rate sits at 1.5%
Inflation at 1.9%

With falling house prices, tougher lending, and inflation below the rbas target, is a rate cut a posibility?

Statement from the rba governer last year

"One continuing source of uncertainty is the outlook for household consumption. Growth in household income remains low, debt levels are high and some asset prices have declined. The drought has led to difficult conditions in parts of the farm sector," he said.

 

Until recently, most of the predictions were that rates would increase. That's actually been the general prediction for quite some time.

Now with restricted credit access, there's talk of rates actually dropping.

Over the years, my observation is that most predictions beyond three months are fairly speculative. The predictions are all, later this year, early next year, this or that will happen. Then as that time comes, the prediction gets extended or changed to suit the current economic conditions.

My conclusion is this. Most of the experts are fairly clueless on their long term predictions. They can probably predict what will happen within the next 3-6 months, but much beyond that, it's speculative.

My my suggestion is this. If you want certainty of repayment amounts over an extended period, then fix (at least part of your loan). Otherwise don't. Variable rates give you flexibility and that's worth something too.

 

Absolutely I stay on variable for flexibility and only fix a loan if I have no plans to refinance that particular loan in 2 years and it makes monetary sense.

Some of the 2 and 3 year rates would seem banks predicting the market as flat however long term 4 and 5 year rates being much higher would suggest banks believe there to be potential rate increases in that period.

Just thought Id throw it out there to get ppls responses.

 

Thanks for the response great insight as always. Hope biz is solid for you.

 

Leaning towards keeping loans variable, especially when an offset is in heavy use.
Had fixed a bunch of loans 5 years ago for between 4.7-4.99% for the stability - wont refix them when they mature. Leave them as variable and play by ear.

 

I just fixed for 2 years, happy with the rate of 3.74% ppor. I'm guessing bank rates will go up regardless, but rba will lower thiers so it should counter balance in the near term. All guesses and don't care cause I'm locked now.