Why are fixed rates lower than variable rates at the moment?

Discussion in 'Loans & Mortgage Brokers' started by Lashes, 28th Aug, 2018.

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  1. Lashes

    Lashes New Member

    28th Aug, 2018
    We are thinking about fixing our investment loans over 3 years and our broker agrees that this is the right thing to do.

    What we don't understand is why the banks are currently advertising very low interest rates for fixed loans.

    The consensus seems to be that the next move from the RBA will be up so why would the banks have a fixed rate lower than the variable rate?
  2. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

    14th Jun, 2015
    Gold Coast
    Because banks DONT sell you their product per se.

    They buy bulk lots of say 500 mill bond, from say your super fund that wants a guaranteed rtn of 3.2 % over say 2 years.

    A bank then repackages that bond into smaller mortgage backed loans, adds a margin and away we go. The bank has its profit locked.

    The RBA doesnt influence fixed rate pricing much at all.

    Im often wrong, so a specialist that works in this area may want comment im sure we have a few on board ?

    As an aside, that UP move from the RBA........ with Basel 4, APRA, the general economy being so so, inflation low, and the fact that money markets arent pricing in a decent rise............

    I dont think there will be much movement for 12 mths to 3 years, more so if we have a change of fed gov.

    Cia and Blueskies like this.