Rate increases - 3 year fixed not too high?

I'm hearing from different sources market predictions that interest rates are going to shoot up quite quickly in the next few years but there seems to be quite a few loan products at least I'm my quick search offering fixed rates at around 2.6% for 3 years.
Banks have to make money so that would indicate to me that they don't think that rates are going to go up past 3% in the next 3 years?

 

That is sharp and might be an exception to where the market is.. most lenders are above 3% already

 

They are factoring in the time that it'll take for rates to increase from the current floating rate to in excess of 3%. Take NAB's current offer of 2.19% or 2.23% comparison rate offer, the rate will need to increase by 0.81% (or by about ⅓) to reach 3%.

Unless funding costs increase dramatically in the short term, the Reserve Bank would be hesitant to apply 3 or more regular increases if 0.25 basis points without having had time to review the impact over the wider economy.

If it takes 18-24 months for the variable rate to increase to or exceed those levels (whilst keeping the wheels of the economy turning, inflation within the target range, unemployment in check, consumer confidence high/stable etc), then the bank is well ahead of the game ie you've fled to safety but paid a premium for the privilege.

Conversely (& more unlikely), rates increase to 3%+ in 3-6 months, and you would be ahead.

 

If I have 2.6% now for 3 years, I would fix it for the component that I don’t offset. That’s pretty low and I don’t see how it can go lower, even variable will be above that soon.

 

These were all those cut price non-bank lenders though.
I probably wouldn't service with any of them.
I think I saw Westpac in nab offering 3 years in the threes.

 

Yeah the thing is and the one of the reasons why I made this post is because there is data showing that the market is pricing in up to 2% rise very very quickly and I have seen that data posted on here but I also then heard it from someone in a bank as well so that made me conclude that interest rates are going to really shoot up once they start going up shoot up fast.
But that doesn't appear to be necessarily reflected in the fixed rates although I probably need to get more data about what the mainstream banks are offering on 2 year fixed rates or 3 year
@ParraEels

 

Fixed and variable rates are priced differently

Fixed rates are priced through bonds while variable rates are priced through the cash rate.

Thus if there is any news on either of them going up then you'd expect the rates to follow.

 

OK what is the current standard variable investment rate and what is the 3 year fixed investment rate?

(Average bank rates)

 

Ave rates




Variable-rate drop related to 70 LVR

 

That’s what I did and at settlement earlier this year I realised my fixed rate with the larger portion of my loan has increased slightly higher than my variable. Now seeing the downward trend for variable rates posted by @ParraEels, I wonder if I should unfix my loan? Or what other factors should I consider?

 

Also remember that new residential loans (fixed or variable) are only a small % of the entire loan market.

 

Well that's interesting I can understand the fixed rates going up but the variable rates going down as a bit confusing but I'm wondering whether or not they're trying to entice people off fixed rates.

Edit: no worries actually see the time scale I realise that's just variable rates trending down to the bottom and they are going to go up from here but fixed rates have already gone up because the bank so protecting themselves from rate rises on the fixed rates they still need to make money when rates go higher

 

shooting up means.. are we expecting like an above 4% or 5% interest?

 

bank cutting variable rate with high LVR customer, some banks are cutting variable rates to attract new customer and to grow their loan book.

Bank make it variable rate attractive so you can chose variable rate and they can increase the rate later.

ie investors bought $ 1m IP with 800k loan. 1 year later you want to change the bank because they charging high variable rate incompare to other banks. Now you want to refinance but you can without LMI as LVR is not at 80. $ 1m property now worth $ 950k (5% down)

Bank keep your business for long time.

 

Maybe it's time to fix I'm looking to refinance a loan

 

not experienced with variable home loan.. can i ask if rate increase abruptly like from 2.5% this month to 4% next month? or does it go 2.5 , 2.7, 2.9? And are we looking at as high as more than 5% or 6% interest rate?

 

Don't panic it won't go up overnight. It won't even go 25 BPS every meeting.

Australian households are submerged in debt up to the eyeball. Economy will collapse before variable rate reach 5-6%.

 

lol im jus being a noob taking out a new loan with high lvr ... first loan in my life .. trying to be mentally prepared..
they hold 10 to 11 meetings each year.. so i reckon to shoot from say 2.3% to 3.3% will take 6 months worse case? just an example..