Fixed rates are going to increase

NAB has lifted fixed rates again by 0.1%. Since 26 October, NAB’s 3-year fixed rate has increased by a total of 0.96 percentage points.
$253 more: NAB hikes mortgage rates… again

 

You are getting way to emotional me thinks. ...

I am talking to guys who are doing mortgage pricing at the Big 4 banks. They are all going to reprice variable rates 20-30 basis points.... so unless you locked in we will see the end of rates under 2.5% P&I for new customers. Add to that another say 1.5-2.5% and it is done. The fixed rates are canaries on the coal mine sought to speak....very soon they will be more than variable rates if the current trajectory continues at that point...variable rates will be moved independent of RBA by the banks.

Never said that it would stay there for long....but by then the damage is done...lets see shall we.

As I said make hay whilst the sun shines. ....made Lemonade when you are handed Lemons. Dems how to roll......

To me this property game is just a game of monopoly....

 

I don't like the chances of massive rent increases in Sydney/Melbourne maybe in undervalued units...but no major increases.

Perth, Brisbane, Adelaide have a different issue...and they will go up a lot.

 

Who in this forum have prepared for the per-pademic back to normal interest rates?
4 to 5% being the normal pre-2020?

Post your strategy and how to risk mitigation?
Sell?
Hold?
Fix interest rate?
Debt recycling?

Thank you!

 

A mix of fixing rates and debt recycling

 

I am.

I was perfectly fine at 5%, and since rates were at 5% I've only taken on an extra $400k in debt, which should be offset by the fact that my rents have grown quite strongly.

 

Interesting that banks are keeping fixed rates low for the 12 months. Is this a sign to you variable rates on the rise also? Banks locking clients in for low 12 month fix rates with the hope of retaining the client on a much high variable rate in 12 months time.

Have you seen any movement on variable rates? I have a feeling variable rates will start to slowly float on an upward trend very shortly.

 

I am currently looking at refinancing a home loan, and was planning to stay with a variable rate. I will now research fixed rate options or a mix.

 

ANZ's turn - effective today

Called it over a year ago when the RBA stepped in with funding, and called it again in NOV 2021 when I said that by mid FEB 2022, everyone would have moved their fixed rates in one big bite or in several small incremental bites ... Clearly each lender is taking a different approach but it will all end up in the same place ; bye bye artificially low fixed rates as the RBA's funding exits stage left, and hello real world fixed rates as banks have to tap global funding pools again.

Rates are still very low.... but the sub 2% market is over . Holding 1 or 2 year fixed rates below 3% will be the new game for the banks .

 

Interestingly since the time of this post, variable rates are down around 20-30bps for new lending from most players (except smaller ones).

In fact, we have some majors privately quoting to us that they will match offers from players they'd usually not compete with. Variable OO rates in general down from big players from around 2.6ish to 2.3ish. This is also a way to negate APRA 3% rule change almost entirely for OO's, by lowering variable rates close to a floor rate. Clever design, as it means only investor borrowers who pay a bit more have BC impacts from this change.

Obvious shift in book and preferences, we will see a big drop of in demand for fixed loans as more and more data comes out.

 

Indeed it is clever tactics by the bank. All new borrowers will go for a variable loan. This will give banks a chance to raise rates and protect their margin in future.

 

This is interesting .. I think banks tried to dip into 'pandemic savings' by trying to raise interest rates but without any real shortage on money supply, it resulted in smaller competitors taking the business from big lenders. Most lenders would still like most borrowers to fix rates in anticipation of rising interest rates but RBA is in no hurry to raise interest rates.. once the supply chain issues are sorted and consumer prices start dropping, they will realise retail sales are plummeting Australia wide. January retail sales were 10% down which is extremely worrying.

Australian economy is far from any signs of recovery, consumer spending is dismal at best .. no central bank would want to restrict money supply by raising interest rates.

Interest rates ONLY go up when consumer demand for goods & services in the economy outgrows supply. What we have right now is reduced demand and extremely reduced supply for both goods and services .. this is a shrinking economy and interest rates should be the last thing on anyone's mind.

 

Looking at ANZ - (Similar scenario with other banks Margins) - It appears that the Net Interest Margins are shrinking and with the latest market update from ANZ there is further pressure. With fixed rates moving - the next opportunity to recoup these NIM would be when there is an upward pressure on Variable rates and there is a good chance that banks will dish out larger interest rate hikes when rates start to move.

 

Banks want you to make a wrong call on fixing rates because your loss is their profit. If you fix the rate, and variable rate goes up, bank has already hedged your rate so it doesn't change their margin. However, if you get it wrong and variable rates start coming down, this is all sweet profit for the bank.

Banks (and in most cases brokers) are NOT on your side. They profit way more if you get it wrong.

 

Wow great charts, thank you. Any charts on CBA as a comparison? ANZ have had a few specific issues with their delivery that could be causing some of that crunch.

 

Interesting comment, haven't thought of this before. Curious, how do you think brokers profit from customers getting this decision wrong? I can understand bank margins on this, but unsure how distributors benefit from it.

 

This is 100% correct. There is already plans in place to slowly move variable rates 25 basis points independent of the RBA. Things when they happen will move a lot quicker than people think!

 

This is exactly what they are doing...the lemmings are not aware yet.....

They raise fixed rates...once they go over the variable...people have no options...get what happens to variable rates....no brainer...