Hi can anyone advise how fixed rates affect variable rates – If fixed rates go down does that mean variable rates will go down also!
Fixed rates do not necessarily affect variable. If anything, it is the other way around.
The banks will have their teams of eggheads locked in back rooms studying what the market is likley to do, and then price their fixed loans accordingly. This allows them to hedge their bets on rate movements.
The best thing about them is that they are a very good indicator of what the variable rates are likley to do ie if you see banks dropping fixed rates all on their own, it is a good indication that variable rates will come down not too long after. Vice versa also applies. Fixed goes up, varialbe rates are likley to go up too.
It is a very reliable method of anticipating short term movements in the market.
All hail the eggheads!
If fixed rates are lower than variable then the bank is betting rates are going to drop more – They employ thousands of expensive economists to analyse such things – but they are not always correct.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
So Terry, when did they throw out the dart board?
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