WEBVTT - Time to think about fixing rates? 0:00:10.200 --> 0:00:13.400 Hello and welcome to the Australians Money Puzzle podcast. I'm 0:00:13.480 --> 0:00:17.120 James Kirby. Welcome aboard everybody. If you're a regular listener 0:00:17.239 --> 0:00:20.000 to the show and you tuned in last Tuesday the 0:00:20.000 --> 0:00:23.080 Property Show to hear Tim Lowles, the head of research 0:00:23.120 --> 0:00:26.319 at the property research group Cautality. He really caught my 0:00:26.360 --> 0:00:30.240 attention with something. A lot of property investors may not 0:00:30.360 --> 0:00:33.600 have considered this just yet, or homeowners for that matter. 0:00:34.159 --> 0:00:36.680 But Tim Lowless said, we're getting close to the bottom 0:00:36.720 --> 0:00:40.600 of the interest rate cutting cycle and if there's another 0:00:40.800 --> 0:00:44.920 cut on Melbourne Cup Day, which is likely ish, it 0:00:45.040 --> 0:00:48.320 means we may not see one as expected early next year. 0:00:48.560 --> 0:00:51.760 And then I am quoting Tim here. And remember that 0:00:51.880 --> 0:00:53.880 this guy is now this is his whole thing, Okay, 0:00:53.960 --> 0:00:57.040 property stats, interest rates research, where the market is moving. 0:00:57.320 --> 0:01:00.000 And he said more people are starting to do their numbers, 0:01:00.200 --> 0:01:03.200 aren't fixing and are weighing up the pros and cons. 0:01:03.280 --> 0:01:07.440 Isn't that interesting? So I thought, well, let's get someone 0:01:07.480 --> 0:01:08.960 to talk about that who would be good on that. 0:01:09.319 --> 0:01:13.240 The ideal person, of course is Sally Tindle, a can star. 0:01:13.520 --> 0:01:15.119 We're going to talk about that. We're going to talk 0:01:15.160 --> 0:01:17.520 first about the whole situation with rates and where they're 0:01:17.520 --> 0:01:19.800 going on, how much you get for your money, and 0:01:19.840 --> 0:01:21.759 then we'll go into the idea of fixing. 0:01:21.920 --> 0:01:24.920 Oh are you Sally, I'm great, James, how are you good? 0:01:25.080 --> 0:01:27.440 Nice to have you on again. I really think that 0:01:27.720 --> 0:01:31.240 investors should tune in here because there is a point 0:01:31.319 --> 0:01:34.520 in time, but you might just give us an entrade 0:01:34.520 --> 0:01:38.520 to this entire situation and tell us like basically where 0:01:38.560 --> 0:01:41.360 we are right. We've had this cutting cycle. It's been 0:01:41.400 --> 0:01:43.720 going on for some time. We think we're coming towards 0:01:43.760 --> 0:01:47.960 the end. I go for money in the banks as 0:01:47.960 --> 0:01:51.520 opposed to borrowing from them. What's this what sort of 0:01:51.560 --> 0:01:53.920 guideline at the moment? What are people getting on deposit 0:01:54.000 --> 0:01:57.320 and what would be the best rates at the stage. 0:01:57.400 --> 0:02:00.240 It's really interesting to look at the numbers because we 0:02:00.280 --> 0:02:02.600 saw on the way up, with all the interest rate hikes. 0:02:02.640 --> 0:02:05.960 On the way down, banks are still picking and choosing 0:02:06.240 --> 0:02:10.119 which savings accounts get a cut, which might miss out, 0:02:10.160 --> 0:02:12.480 which is a good thing in a cutting cycle, or 0:02:12.520 --> 0:02:15.680 they might they might be juggling between base rates and 0:02:15.760 --> 0:02:19.240 bonus rates to make their profit margins still stack up. 0:02:19.400 --> 0:02:22.040 So before the hikes, we saw. 0:02:21.840 --> 0:02:25.239 The average ongoing savings rate at zero point three nine percent. 0:02:25.280 --> 0:02:27.000 I mean, that's just ridiculous, isn't it. 0:02:27.320 --> 0:02:29.800 At the peak it was three point four to three percent, 0:02:30.400 --> 0:02:33.240 and then today is three point zero six percent. 0:02:33.440 --> 0:02:34.600 So banks on. 0:02:34.600 --> 0:02:37.920 The way up didn't pass on all the rate hikes 0:02:37.919 --> 0:02:40.640 on the way down, they haven't passed through all the 0:02:40.720 --> 0:02:43.520 rate cuts when you're looking at those average rates. But 0:02:43.600 --> 0:02:46.240 there's a world of difference between an average rate and 0:02:46.280 --> 0:02:49.320 a competitive one. So I just said three point zero 0:02:49.360 --> 0:02:52.480 six that's the average ongoing savings rate on our database 0:02:52.520 --> 0:02:53.560 at this point in time. 0:02:53.960 --> 0:02:55.520 It's excluding kids accounts. 0:02:55.520 --> 0:02:59.920 I believe today the highest ongoing savings rate is five percent. 0:03:00.360 --> 0:03:01.480 It's still five percent. 0:03:01.520 --> 0:03:05.120 That's really interesting. So a call as such, should you 0:03:05.160 --> 0:03:08.560 should be getting three? But there are better rates than that, 0:03:08.639 --> 0:03:11.520 and you can still get up to five. This figure five, 0:03:11.960 --> 0:03:13.960 Can you frame it for us? Is it? Is it 0:03:14.120 --> 0:03:16.079 a term deposit? Is it? Do you have to keep 0:03:16.080 --> 0:03:16.840 it in for years? 0:03:17.040 --> 0:03:18.080 No, it's at call. 0:03:18.480 --> 0:03:21.919 There are a world of caveats around it though, because 0:03:21.960 --> 0:03:25.960 it's only for people aged eighteen to thirty four. I 0:03:25.960 --> 0:03:29.480 believe now it's from west packet that Westpac just increase 0:03:29.560 --> 0:03:30.360 the age bracket. 0:03:30.600 --> 0:03:33.240 So you have to be young. It unfortunately rules me 0:03:33.360 --> 0:03:36.800 out in a significant way. I would say, what's that? 0:03:37.560 --> 0:03:39.520 Yes, I get it, Yeah, okay, and. 0:03:39.480 --> 0:03:41.520 Looking for first home buyers, right, But you also then 0:03:41.640 --> 0:03:44.560 have to make twenty plus transactions on a linked bank 0:03:44.560 --> 0:03:46.520 account in any given month and grow. 0:03:46.400 --> 0:03:47.560 Your savings balance in a month. 0:03:47.640 --> 0:03:50.280 So there's lots of terms and conditions to qualify for 0:03:50.320 --> 0:03:52.280 that five percent rate. And let me tell you they 0:03:52.280 --> 0:03:55.600 are by themselves at that five percent ongoing rate. A 0:03:55.680 --> 0:03:59.040 competitive savings rate is more around the four point five mark. 0:03:59.360 --> 0:04:01.520 A competitive and realistic savings. 0:04:01.280 --> 0:04:05.120 Rape some well term deposits. I know that traditionally people 0:04:05.560 --> 0:04:08.960 were using things like mcquarie. I think has always been 0:04:09.000 --> 0:04:11.920 in the mix. Assn't I in g I'm naming these 0:04:11.960 --> 0:04:14.160 off the top of my head. There by no means promotions. 0:04:14.160 --> 0:04:15.960 Further one, let me tell you, do you have any 0:04:15.960 --> 0:04:18.960 sense of what are the most popular for investors or 0:04:19.000 --> 0:04:21.960 for people with serious levels of cash that are moving 0:04:22.040 --> 0:04:23.719 within the banking system. They don't have to be in 0:04:23.720 --> 0:04:24.279 the Big four. 0:04:25.240 --> 0:04:25.440 Yeah. 0:04:25.520 --> 0:04:27.839 So it's interesting to see because the Big four suddenly 0:04:27.920 --> 0:04:30.640 aren't posting the highest rates, the highest term deposit rates 0:04:30.640 --> 0:04:33.080 that I can see for any term is first option bank, 0:04:33.120 --> 0:04:35.120 but it's only a three month term at four point 0:04:35.200 --> 0:04:37.800 five percent, and these move around all the time. I've 0:04:37.839 --> 0:04:40.360 done this on the balance of fifty thousand dollars as well. 0:04:40.440 --> 0:04:43.080 Let's be clear, for a six month term deposit rate 0:04:43.080 --> 0:04:45.880 you're looking at in one bank, there are relatively new 0:04:45.920 --> 0:04:49.599 incomer at four point three eight percent, and then when 0:04:49.600 --> 0:04:52.279 you want to get into the one year, two years, 0:04:52.279 --> 0:04:56.640 three years, they're very much dominated by Judo Bank, Rabobank, 0:04:56.720 --> 0:04:59.760 move Bank, and they're sitting around that four percent mark. 0:05:00.040 --> 0:05:02.960 That's for the highest term deposit rates. If you're looking 0:05:03.000 --> 0:05:05.440 at the Big four, very different story. 0:05:05.680 --> 0:05:07.240 Just for the talk about the Big four. So you've 0:05:07.279 --> 0:05:10.599 seen four and a half percent on a extended time 0:05:10.760 --> 0:05:13.280 period term deposit two years or so, four and a 0:05:13.279 --> 0:05:15.680 half percent is what you should that's the maximum, it's 0:05:15.720 --> 0:05:16.440 what's possible. 0:05:17.279 --> 0:05:19.800 Oh only just that was for three months. 0:05:19.920 --> 0:05:23.320 I'm saying around the four percent mark, and you really 0:05:23.400 --> 0:05:26.200 have to stretch yourself to go and find that competitive rate. 0:05:26.320 --> 0:05:26.920 They're not that. 0:05:26.960 --> 0:05:29.680 Easy to find at four percent. Whereas you balance it 0:05:29.760 --> 0:05:32.480 up against the APT core savings accounts rates where you 0:05:32.520 --> 0:05:35.039 should easily be able to find an ongoing savings rate 0:05:35.080 --> 0:05:37.880 at four percent, You just in many cases have to 0:05:37.920 --> 0:05:40.359 meet some prickly monthly terms and conditions. 0:05:40.360 --> 0:05:41.560 And you mentioned. 0:05:41.240 --> 0:05:44.080 Mcquarie Bank before because they're one of the ones that 0:05:44.240 --> 0:05:46.920 have no strings attached savings account rates. 0:05:46.920 --> 0:05:48.160 So that might suit. 0:05:47.920 --> 0:05:51.680 People who are betting that there's not many more cash 0:05:51.760 --> 0:05:54.280 rate cuts to come and don't want the fuss of 0:05:54.600 --> 0:05:58.159 meeting certain terms and conditions. Mcquarie certainly is a leader 0:05:58.200 --> 0:06:01.279 in that space, but so is Able Banking and austrayan 0:06:01.400 --> 0:06:06.480 Unity Heartland Bank AMP. They're all offering no strings attached 0:06:06.600 --> 0:06:10.040 savings accounts that are at core with decent balance caps. 0:06:10.160 --> 0:06:11.240 Might I add. 0:06:11.080 --> 0:06:14.039 Anywhere between four point twenty five percent and four point 0:06:14.080 --> 0:06:15.000 five five percent? 0:06:15.240 --> 0:06:18.799 Okay? Then do they have these these are our called okay, 0:06:18.800 --> 0:06:21.400 and they have no strings attached. We take that as 0:06:21.480 --> 0:06:24.280 red hard to believe, but I'll take your word for it. 0:06:25.720 --> 0:06:28.200 Ah. The only string that I are the only obvious strings. 0:06:28.240 --> 0:06:31.640 So there's no age caps, there's no monthly terms in conditions. 0:06:31.960 --> 0:06:33.720 Some of them have welcome rates. 0:06:33.480 --> 0:06:36.080 But we're ignoring them completely because they only last for 0:06:36.080 --> 0:06:38.760 what four or five months maximum. The only cap I'm 0:06:38.760 --> 0:06:41.800 including is a balance cap. And so for example, I 0:06:41.839 --> 0:06:44.599 mentioned Astray and Unity. It has a balance cap of 0:06:44.640 --> 0:06:47.279 fifty thousand dollars, so as soon as you get just 0:06:47.360 --> 0:06:49.680 over fifty thousand dollars in that account, you won't get 0:06:49.680 --> 0:06:53.400 that high rate. But others like mcquarie offering four point 0:06:53.480 --> 0:06:56.680 two five percent, they've got a balance cap of two million. 0:06:57.040 --> 0:07:00.320 Right, so ironically if you put in more or your 0:07:00.360 --> 0:07:03.200 read actually might reduce on the amount over their cap time. 0:07:03.960 --> 0:07:04.640 Absolutely. 0:07:05.240 --> 0:07:10.120 Oh look, these accounts lit it with you know, age caps, 0:07:10.160 --> 0:07:14.440 balance cats, monthly caps, withdrawal caps, you name it. Same 0:07:14.440 --> 0:07:18.120 as accounts are absolutely littered with terms and conditions where 0:07:18.160 --> 0:07:20.360 if you put one foot wrong in any given month, 0:07:20.440 --> 0:07:22.600 you could see your interest rate go from like four 0:07:22.640 --> 0:07:25.360 and a half down to in some cases zero point 0:07:25.520 --> 0:07:26.640 zero zero percent. 0:07:26.840 --> 0:07:28.920 Yeah, that's a crucial point. That's a really good point. 0:07:29.200 --> 0:07:32.480 Keep that in mind, folks. This is literally it's become 0:07:32.480 --> 0:07:36.960 a game. And I think it would be innocent of 0:07:37.000 --> 0:07:38.800 you to go into a bank and think that you 0:07:38.800 --> 0:07:40.760 can put your money in and get a certain rate 0:07:40.840 --> 0:07:43.920 without some conditions. Some of them are more subtle than others, 0:07:44.040 --> 0:07:46.440 like the ones that at least just talking about caps, 0:07:46.440 --> 0:07:49.200 for instance, but they want to know how much you 0:07:49.280 --> 0:07:50.840 might wonder why they want to do that, But I 0:07:50.880 --> 0:07:53.960 suppose they just want more customers on these rates, So 0:07:54.640 --> 0:08:00.680 sally do the deposit rates then reflect it's starting to 0:08:00.800 --> 0:08:04.920 drop basically in anticipation of where we might be going 0:08:04.960 --> 0:08:07.120 on the cycle, because if Tim is right, and many 0:08:07.120 --> 0:08:08.960 economists are right, we are coming to the end of 0:08:08.960 --> 0:08:09.960 the cutting cycle. 0:08:11.240 --> 0:08:13.480 Yeah, it's interesting. I do think we're also coming to 0:08:13.520 --> 0:08:15.400 the end of the cutting cycle. Look, I'm going to 0:08:15.440 --> 0:08:17.679 throw it out there. We could be at the end already. 0:08:17.840 --> 0:08:21.200 We don't know certainly. You know, there's a meeting coming up, 0:08:21.280 --> 0:08:23.840 there's a lot of speculation about what might happen. But 0:08:24.000 --> 0:08:27.640 with inflation really still struggling to get back to that 0:08:27.800 --> 0:08:31.920 target band in a consistent manner, I do wonder whether 0:08:31.960 --> 0:08:34.800 we are already at the end. Certainly, if you've got 0:08:34.840 --> 0:08:36.640 money in the bank, if you've got a mortgage, you 0:08:36.640 --> 0:08:40.360 should not be banking or counting on something happening for. 0:08:40.600 --> 0:08:42.559 Certain because we just don't know. 0:08:43.040 --> 0:08:45.760 Looking at the Big four bank forecasts, and these could 0:08:45.840 --> 0:08:48.760 change in coming days when we get that inflation data. 0:08:48.800 --> 0:08:51.839 But looking at the big four banks, we've got A 0:08:52.000 --> 0:08:55.199 and Z, CBA and NAB all saying one more cut 0:08:56.080 --> 0:08:58.640 and West Facts still saying three, although I do feel 0:08:58.640 --> 0:08:58.920 like that. 0:08:58.960 --> 0:08:59.960 Forecast might change. 0:09:00.000 --> 0:09:01.839 That's change, that's yeah. 0:09:01.880 --> 0:09:04.479 That can give you a good idea of the spectrum. 0:09:04.720 --> 0:09:06.600 Three of the big four banks are saying no more 0:09:06.640 --> 0:09:09.480 cuts this year. West Pak is the only one saying 0:09:09.600 --> 0:09:11.640 one could come at the next meeting. 0:09:11.679 --> 0:09:14.480 But again time will tell when we get a better. 0:09:14.280 --> 0:09:16.440 Read on the inflation data and marry it up with 0:09:16.480 --> 0:09:19.240 the unemployment data. What's really interesting for the RBA at 0:09:19.240 --> 0:09:22.360 this point in time is that previously, when inflation was 0:09:22.480 --> 0:09:25.679 really running out of hand, it was really easy decisions 0:09:25.679 --> 0:09:29.480 for them to just know, hike and get inflation under control. 0:09:29.720 --> 0:09:33.320 Now that they've got inflation under control, the balancing act 0:09:33.400 --> 0:09:36.400 between their two key priorities keeping his strands in jobs 0:09:36.480 --> 0:09:40.200 and keeping inflation in check is becoming a lot harder. 0:09:40.440 --> 0:09:42.600 So I think that the decision making for the RBA 0:09:42.880 --> 0:09:44.839 is quite fought at this point in time. 0:09:45.120 --> 0:09:47.280 Now we're getting to the bottom of the cycle. 0:09:48.040 --> 0:09:50.719 And I suppose what's really important for our listeners I'm 0:09:50.720 --> 0:09:53.240 going to deal with this and in Moorman, folks, is that 0:09:53.280 --> 0:09:57.920 the banks don't hang around for the official rates to 0:09:58.000 --> 0:10:00.920 take their turn. They move off and the head of 0:10:01.000 --> 0:10:04.480 the future direction, so you might be thinking of fixing 0:10:04.520 --> 0:10:07.080 for the first time. They've been thinking about it for 0:10:07.120 --> 0:10:18.520 some time. Back in a moment, Hello and welcome back 0:10:18.520 --> 0:10:21.319 to The Australian's Money Puzzle podcast. I'm James Kirby and 0:10:21.360 --> 0:10:24.679 I'm talking to Sally Tindall, who is the data insights 0:10:24.720 --> 0:10:28.840 director at Canstar, the Comparison rate comparison service. You said 0:10:28.880 --> 0:10:32.040 something very interesting in the first segment which dovetails very 0:10:32.080 --> 0:10:34.280 much with what Tim Lowless is saying. And I've got 0:10:34.280 --> 0:10:36.200 two of you now. I've got someone who's in a 0:10:36.200 --> 0:10:39.719 cross rates and someone who's across property and they are 0:10:39.760 --> 0:10:42.360 both saying that we're coming to the end of the 0:10:42.400 --> 0:10:47.080 cycle and people are starting to think about fixing. I 0:10:47.080 --> 0:10:49.160 don't know if you're saying that, but tell us first 0:10:49.160 --> 0:10:51.240 of all, tell us the picture. I imagine no one's 0:10:51.240 --> 0:10:55.800 fixing right now and that activity has shrunk enormously because 0:10:55.800 --> 0:10:58.280 we've had a cutting cycle. I don't know is that 0:10:58.320 --> 0:10:59.000 the case. 0:11:00.280 --> 0:11:01.480 Ly, and I think I might need to take you 0:11:01.520 --> 0:11:03.600 on a little bit of a journey just to remind 0:11:03.600 --> 0:11:07.600 ourselves about Australians and our attitude towards fixing. So you know, 0:11:07.720 --> 0:11:11.800 often it's based on you know, an increasing fixing is 0:11:12.120 --> 0:11:15.640 often based on you know, strategic priorities for the banks, 0:11:16.080 --> 0:11:19.360 what the neighbor's doing, things like that, rather than whether 0:11:19.360 --> 0:11:21.280 we're at the top or the bottom of the cycle. 0:11:21.559 --> 0:11:23.840 But if you think about it strands, we might like 0:11:23.880 --> 0:11:26.040 to gamble on what two up or something, but we 0:11:26.160 --> 0:11:28.920 don't like to gamble on our mortgage when just not 0:11:29.040 --> 0:11:32.360 big fixes, I think because we're petrified of the break 0:11:32.400 --> 0:11:35.679 fees that still potentially come with fixed rates and if 0:11:35.720 --> 0:11:36.080 you want to. 0:11:36.080 --> 0:11:36.800 Get out early. 0:11:36.920 --> 0:11:41.040 So the peak of fixing was in July twenty twenty one, 0:11:41.080 --> 0:11:44.520 when forty six percent of new and refinance loans opted 0:11:44.600 --> 0:11:48.120 for a fix rate that wasn't even half And this 0:11:48.280 --> 0:11:51.720 was when the banks were offering in some cases four 0:11:51.800 --> 0:11:54.880 year fix rates that started with the one and only 0:11:54.960 --> 0:11:57.200 half of us opted to fix. 0:11:57.400 --> 0:11:58.880 Isn't that incredible? It is? 0:11:59.120 --> 0:12:01.360 It is really look back. I mean, what were people 0:12:01.400 --> 0:12:03.880 thinking it was going to go lower? It was still 0:12:03.920 --> 0:12:05.920 all forever, I wonder. 0:12:05.520 --> 0:12:09.400 But really I fixed for two years. I'm kicking myself. 0:12:09.400 --> 0:12:11.600 I didn't fix before. I was just so silly. 0:12:11.640 --> 0:12:14.640 But the second biggest peak in fixing in recent data 0:12:15.000 --> 0:12:17.600 was right before the GFC and that's when you know, 0:12:17.720 --> 0:12:20.160 interest rates are like a discount. A variable rate was 0:12:20.160 --> 0:12:22.800 sitting at I've looked it up eight point ninety six 0:12:22.840 --> 0:12:26.080 percent according to the RBA standard variable rates were over 0:12:26.160 --> 0:12:29.640 nine percent. People thought that rates would be getting over 0:12:29.679 --> 0:12:32.400 ten percent at one point and not everyone, but a 0:12:32.400 --> 0:12:36.040 lot of people about a quarter panic fixed at that point. 0:12:36.200 --> 0:12:37.160 And then what happened. 0:12:37.280 --> 0:12:40.280 Are people more likely to fix in our market out 0:12:40.280 --> 0:12:42.400 of fear that the rates are going too high than 0:12:42.440 --> 0:12:44.480 they are to take opportunity of the fact that they're 0:12:44.520 --> 0:12:45.000 super low. 0:12:45.760 --> 0:12:47.079 Well, I think it was a bit of both. 0:12:47.160 --> 0:12:50.760 So absolutely, back in just before the GFC, just before 0:12:50.800 --> 0:12:53.480 rates fell off a cliff yep, that was panic fixing, 0:12:53.640 --> 0:12:56.360 Absolutely because rates were sitting at the nine percent mark, right, 0:12:56.760 --> 0:13:00.079 But back you know, then fast forward to you know, COVID. 0:13:00.400 --> 0:13:02.160 Maybe there was a little bit of fear in there 0:13:02.200 --> 0:13:05.199 because it was the fear of unknown. Absolutely, but that 0:13:05.320 --> 0:13:10.840 was really driven by the banks offering incredibly sharp rates. 0:13:11.120 --> 0:13:13.760 And why were the banks offering incredibly sharp rates because 0:13:13.760 --> 0:13:15.640 they were working with the government, They were working with 0:13:15.679 --> 0:13:18.200 the RBA, and the RBA was handing them out cheap 0:13:18.280 --> 0:13:21.439 six rate funding. So again, it wasn't that we were 0:13:21.480 --> 0:13:22.960 at the bottom of the top of the cycle. 0:13:23.200 --> 0:13:25.959 So much as there was this other factor at play 0:13:26.000 --> 0:13:26.440 that we're. 0:13:26.520 --> 0:13:29.640 Driving people to actually lock in their rates, then the 0:13:29.720 --> 0:13:30.800 rate hikes happened. 0:13:31.240 --> 0:13:32.920 Everyone fled from fixing. 0:13:33.160 --> 0:13:37.320 The lowest rate of fixing was April twenty twenty four, 0:13:38.120 --> 0:13:40.880 so we were almost done with the cash rate hikes, 0:13:41.120 --> 0:13:43.280 and it was one point two percent of new and 0:13:43.320 --> 0:13:44.400 refinance loans. 0:13:44.640 --> 0:13:48.120 It fell from forty six to one one point two. 0:13:49.440 --> 0:13:50.679 What do you think it is right now? 0:13:52.080 --> 0:13:52.880 So we don't know. 0:13:53.080 --> 0:13:56.319 So the ABS unfortunately has stopped publishing this data, so 0:13:56.360 --> 0:13:59.679 we now crawl through the weeds of the big banks 0:14:00.360 --> 0:14:03.199 books so whenever they do half year or full year results. 0:14:03.480 --> 0:14:04.839 But it's still incredibly low. 0:14:04.920 --> 0:14:07.199 I do know that much because I'm looking at CBA's 0:14:07.240 --> 0:14:10.839 most recent results. They're full year results, and fixing is 0:14:10.880 --> 0:14:14.080 about one percent of new mortgages coming through and five 0:14:14.120 --> 0:14:16.199 percent of the whole loan book, and some of them 0:14:16.240 --> 0:14:19.480 will still have been you know, legacy fixes from back 0:14:19.560 --> 0:14:23.040 in twenty twenty one, twenty twenty two periods, So really 0:14:23.080 --> 0:14:23.840 incredibly low. 0:14:24.320 --> 0:14:25.320 Do you know why? 0:14:25.480 --> 0:14:27.560 Okay, so the big question is why, and you're about 0:14:27.600 --> 0:14:29.880 to ask me this, I know, but the lowest fix 0:14:30.000 --> 0:14:33.360 rate on our database is significantly lower than the lowest variable, 0:14:33.440 --> 0:14:34.520 even though there's. 0:14:34.360 --> 0:14:36.640 More one more cash rate cut to come. 0:14:36.760 --> 0:14:39.240 We don't know, but you know, I think that's because 0:14:39.320 --> 0:14:42.520 borrows aren't really sure how many cash rate cuts are 0:14:42.520 --> 0:14:44.560 still to come, and they really want to believe there's 0:14:44.560 --> 0:14:45.720 more than just one coming. 0:14:46.080 --> 0:14:48.800 Right, Yes, but no one rings a bell, of course, 0:14:48.840 --> 0:14:50.280 this is the thing, right, No one rings a bell 0:14:50.320 --> 0:14:51.640 at the bottom, and no one rings a bell at 0:14:51.680 --> 0:14:52.000 the top. 0:14:52.760 --> 0:14:55.800 And you can never be certain except with the you know, 0:14:55.840 --> 0:15:00.600 clarity of hindsight. And the penalties for fixing and often 0:15:00.720 --> 0:15:04.280 be far more significant than the penalties for getting it 0:15:04.360 --> 0:15:05.160 wrong un variable. 0:15:05.360 --> 0:15:07.240 I have two things here. The first thing I want 0:15:07.280 --> 0:15:10.920 to just before we talk about the penalties, is there 0:15:10.920 --> 0:15:13.360 anything like an average long term average of fixing. 0:15:15.360 --> 0:15:16.280 I don't have it, Handy. 0:15:16.280 --> 0:15:17.680 It sounds like if it was one, it was, it 0:15:17.680 --> 0:15:19.960 would tell us very little anyway, because if it ranges 0:15:20.000 --> 0:15:23.240 from forty six to one. Yeah, So like the average 0:15:23.240 --> 0:15:25.880 Meltbourne temperature in January, you know, twenty eight degrees doesn't 0:15:25.880 --> 0:15:26.520 tell you anything. 0:15:26.600 --> 0:15:28.200 I'm going to take a punch and I'm going to 0:15:28.240 --> 0:15:31.800 say somewhere between five and ten percent, I'd say it's 0:15:31.840 --> 0:15:32.680 always been low. 0:15:33.000 --> 0:15:36.360 Okay, all right, Now about the penalties, I thought in 0:15:36.400 --> 0:15:39.840 my naivity that the penalties were more or less gone. 0:15:40.960 --> 0:15:43.080 So exit fees on mortgages are gone. 0:15:43.120 --> 0:15:46.280 They hit the curb twenty ten or twenty twelve, one 0:15:46.280 --> 0:15:49.280 of those two years, but a long time ago. Previously 0:15:49.400 --> 0:15:51.560 banks could sting you, whether you were on a fixed 0:15:51.600 --> 0:15:55.320 or weariable rate, for exiting your mortgage before your thirty 0:15:55.400 --> 0:15:58.840 years are up, and they were astronomical fees, and so 0:15:59.080 --> 0:16:02.760 they've gone. Now there are fees for applying for a 0:16:02.800 --> 0:16:05.760 home loan. There are fees for discharging a home loan, 0:16:05.800 --> 0:16:08.560 but they're relatively small at about three hundred and fifty 0:16:08.560 --> 0:16:12.280 dollars for those discharge fees, different to exit fees. There's 0:16:12.280 --> 0:16:15.640 some state government fees for you know, switching. 0:16:15.320 --> 0:16:17.320 Lenders as well and things like that. 0:16:17.440 --> 0:16:20.400 But you know, all in all, we estimate that someone 0:16:20.440 --> 0:16:24.760 that's switching their mortgage is paying what about one to 0:16:24.840 --> 0:16:27.600 one and a half thousand dollars in fees, some of 0:16:27.600 --> 0:16:31.160 which are negotiable. So there's not those big exit fee 0:16:31.600 --> 0:16:35.520 penalties on variable rates. But if you sign up to 0:16:35.560 --> 0:16:37.760 a fixed rate and you said to the bank, yes, 0:16:37.920 --> 0:16:40.000 I'm going to pay a fixed rate of five percent 0:16:40.040 --> 0:16:43.000 for the next two years, and you break that contract 0:16:43.280 --> 0:16:45.960 early and the bank is out of pocket because you 0:16:46.080 --> 0:16:50.240 broke that contract, they are entitled to charge you what 0:16:50.560 --> 0:16:52.000 they're out of pocket costs. 0:16:52.240 --> 0:16:55.640 Okay, and they can I see. 0:16:54.520 --> 0:16:59.840 And sometimes yeah, sometimes these are negotiable and sometimes I've 0:17:00.400 --> 0:17:03.280 can depend on where your next step is. So if 0:17:03.280 --> 0:17:04.919 you say to your bank, I really just want to 0:17:04.960 --> 0:17:07.520 move to a more competitive fixed rate, they might wait 0:17:07.560 --> 0:17:09.639 the feats. If you say, I want to stick with you, 0:17:09.680 --> 0:17:11.959 but I want to go to variable, but I'm going 0:17:12.000 --> 0:17:15.600 to stay with you, guys, maybe they'll negotiate those fees. 0:17:15.640 --> 0:17:17.280 It's always worth having that conversation. 0:17:17.600 --> 0:17:19.679 And obviously the worst one is if you see I 0:17:19.680 --> 0:17:22.160 can't do it anymore and I'm leaving you entirely, then 0:17:22.359 --> 0:17:27.120 obviously why wouldn't they impose their charges that they can legally? Okay, 0:17:27.840 --> 0:17:31.399 So million dollar question, if I talked to you this 0:17:31.440 --> 0:17:34.520 time next year, what do you think the fixed ratio 0:17:34.640 --> 0:17:37.560 will be. Do you think if we have no more cuts, 0:17:37.800 --> 0:17:40.480 and if we find clear stabilization and if the cycle 0:17:40.560 --> 0:17:43.120 is clearly over, do you think we'll see a lift 0:17:43.119 --> 0:17:45.920 in the number of people fixing or at least considering it. 0:17:46.960 --> 0:17:48.840 I do think we'll see a lift in the number 0:17:48.880 --> 0:17:51.119 of people fixing, but I don't think it'll be a 0:17:51.160 --> 0:17:53.359 significant one. I'm not going back to the days of 0:17:53.400 --> 0:17:55.280 where we were close to half of the people. 0:17:55.080 --> 0:17:56.480 Opting for a fixed rate. 0:17:56.880 --> 0:17:59.240 I think some of those people that tried out fixing, 0:17:59.320 --> 0:18:01.960 perhaps for the firs time, in that period of record 0:18:02.000 --> 0:18:05.479 low rates, really liked the certainty that it brought. I 0:18:05.520 --> 0:18:08.520 certainly know that from talking to you know, friends who've 0:18:09.040 --> 0:18:12.560 you know, always interested in working out you know, what's 0:18:12.600 --> 0:18:14.760 happening with fixed rates because they want to fix again 0:18:14.800 --> 0:18:18.000 because they liked that certainty. So I do think that 0:18:18.160 --> 0:18:21.679 perhaps that period of low rates has encouraged people and 0:18:21.760 --> 0:18:25.520 opens people's minds to that certainty where I think fixing 0:18:25.600 --> 0:18:29.280 gets problematic and where you know, we won't see these shots. 0:18:29.480 --> 0:18:32.439 Why we won't see this sharp space spike, brother is 0:18:32.480 --> 0:18:34.359 because the break fees problematic. 0:18:34.600 --> 0:18:37.480 But also fixed rates tend to be a lot. 0:18:37.359 --> 0:18:41.080 Less flexible, so you typically can't get an offset account 0:18:41.119 --> 0:18:44.320 with them. You typically have caps on how much extra 0:18:44.400 --> 0:18:46.560 you can pay in that fixed rate term, and again 0:18:46.640 --> 0:18:50.440 that turns some people off. Although you know, some people 0:18:50.520 --> 0:18:53.000 do then have a foot in both camps, opt for 0:18:53.080 --> 0:18:56.000 a split loan, you know, take a gamble each way, 0:18:56.080 --> 0:18:58.840 but also get the flexibility that a variable rate can 0:18:58.880 --> 0:19:02.359 bring on that portion of their homeland, take advantage of 0:19:02.359 --> 0:19:04.639