Since November 2010 rates have slowly dropped to what is today an historic low, with a cash rate of 2.50%. The majority of economists expect 2014 to be a year ‘on hold’ and some are starting to predict rises as early as next year, with Bill Evans Westpac’s chief economist predicting rates to start rising in second half of 2015. So when will the RBA make a move and should you consider fixing your rate now?
It’s all in the timing
At the moment, both residential and commercial 1-3 year fixed interest rates are around 5%, and with the banks average standard variable rate for the past 10 years around 7% it would seem only logical that now is the time to fix? But which way will the market move?
Unfortunately no-one knows what is going to happen in the market tomorrow, but fixed rates give you an amount of certainty and in planning your cash-flow this is something that is highly attractive to many businesses and families.
You need to accept the fact that fixing is speculative and therefore you’re taking a risk. This is why a lot of people choose to fix only a portion of their funding – you can fix 30%, 50%, 80% or whatever you feel comfortable with. The rest of your facility can remain flexible, therefore hedging your debt!
What are the ‘experts’ saying?
As for the experts, their predictions are mixed as to whether official rates will go up in the short term, however the ‘BusinessDay’ panel of 25 of Australia’s leading forecasters in the diverse fields of market economics, academia, consultancy and industry associations unanimously predict that 2014 will be a year of no movement.
Why leave it to chance, time to review your lending and structure? Giving too much security to your bank? Speak to an expert at Discovery Finance Group on 1300 88 73 28 or email us.