Rate Club

To Fix Or Not To Fix?

Property Club Rate Club Blog

People act in fear. The banks know it and they can use this to encourage people to fix at the wrong time.

The chart below shows the history of loans being fixed. If you compare that with the interest rate chart from the RBA you can see that most people fix at the wrong time – just before a rate drop. Is that happening now?

It was announced by the Treasurer that the Australian Competition Consumer Council, has been asked to investigate whether banks have been misleading over rate hikes.

Mr Treasurer, I can save you a lot of time, effort and money. If you have been reading the Rate Club since 2008, you will know that the banks have not been passing on the rate cuts. That previous Treasurers to Swann and yourself used to arraign the banks immediately after an RBA drop to see that the drop was passed on in full.

So the results of your ACCC inquiry will be that the banks have been misleading, claiming that the cost of funds have gone up.

What does this mean? I think there is going to be pressure on rates to come down even further. The banking monopoly will definitely pass on the Government’s $1.5 billion tax. Because is can. It’s a monopoly.

This in turn, will heighten media attention on rates connection with rising unemployment and underemployment and falling wages.

In my opinion. Not the time to fix. I think that rates will be coming down. As usual, my concern is that our timing has to be that we pop out after the next rise has passed through the system, not pop out in the middle of the rising prices and lose all our gains.

But what do you think? I look forward to hearing from you with your opinions.

Kevin Young
Property Club Founder