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Transcript

Time to think about fixing rates? · The Money Puzzle

0:10
Speaker 1: Hello and welcome to the Australians Money Puzzle podcast. I'm
0:13
Speaker 1: James Kirby. Welcome aboard everybody. If you're a regular listener
0:17
Speaker 1: to the show and you tuned in last Tuesday the
0:20
Speaker 1: Property Show to hear Tim Lowles, the head of research
0:23
Speaker 1: at the property research group Cautality. He really caught my
0:26
Speaker 1: attention with something. A lot of property investors may not
0:30
Speaker 1: have considered this just yet, or homeowners for that matter.
0:34
Speaker 1: But Tim Lowless said, we're getting close to the bottom
0:36
Speaker 1: of the interest rate cutting cycle and if there's another
0:40
Speaker 1: cut on Melbourne Cup Day, which is likely ish, it
0:45
Speaker 1: means we may not see one as expected early next year.
0:48
Speaker 1: And then I am quoting Tim here. And remember that
0:51
Speaker 1: this guy is now this is his whole thing, Okay,
0:53
Speaker 1: property stats, interest rates research, where the market is moving.
0:57
Speaker 1: And he said more people are starting to do their numbers,
1:00
Speaker 1: aren't fixing and are weighing up the pros and cons.
1:03
Speaker 1: Isn't that interesting? So I thought, well, let's get someone
1:07
Speaker 1: to talk about that who would be good on that.
1:09
Speaker 1: The ideal person, of course is Sally Tindle, a can star.
1:13
Speaker 1: We're going to talk about that. We're going to talk
1:15
Speaker 1: first about the whole situation with rates and where they're
1:17
Speaker 1: going on, how much you get for your money, and
1:19
Speaker 1: then we'll go into the idea of fixing.
1:21
Speaker 2: Oh are you Sally, I'm great, James, how are you good?
1:25
Speaker 1: Nice to have you on again. I really think that
1:27
Speaker 1: investors should tune in here because there is a point
1:31
Speaker 1: in time, but you might just give us an entrade
1:34
Speaker 1: to this entire situation and tell us like basically where
1:38
Speaker 1: we are right. We've had this cutting cycle. It's been
1:41
Speaker 1: going on for some time. We think we're coming towards
1:43
Speaker 1: the end. I go for money in the banks as
1:47
Speaker 1: opposed to borrowing from them. What's this what sort of
1:51
Speaker 1: guideline at the moment? What are people getting on deposit
1:54
Speaker 1: and what would be the best rates at the stage.
1:57
Speaker 3: It's really interesting to look at the numbers because we
2:00
Speaker 3: saw on the way up, with all the interest rate hikes.
2:02
Speaker 3: On the way down, banks are still picking and choosing
2:06
Speaker 3: which savings accounts get a cut, which might miss out,
2:10
Speaker 3: which is a good thing in a cutting cycle, or
2:12
Speaker 3: they might they might be juggling between base rates and
2:15
Speaker 3: bonus rates to make their profit margins still stack up.
2:19
Speaker 2: So before the hikes, we saw.
2:21
Speaker 3: The average ongoing savings rate at zero point three nine percent.
2:25
Speaker 2: I mean, that's just ridiculous, isn't it.
2:27
Speaker 3: At the peak it was three point four to three percent,
2:30
Speaker 3: and then today is three point zero six percent.
2:33
Speaker 2: So banks on.
2:34
Speaker 3: The way up didn't pass on all the rate hikes
2:37
Speaker 3: on the way down, they haven't passed through all the
2:40
Speaker 3: rate cuts when you're looking at those average rates. But
2:43
Speaker 3: there's a world of difference between an average rate and
2:46
Speaker 3: a competitive one. So I just said three point zero
2:49
Speaker 3: six that's the average ongoing savings rate on our database
2:52
Speaker 3: at this point in time.
2:53
Speaker 2: It's excluding kids accounts.
2:55
Speaker 3: I believe today the highest ongoing savings rate is five percent.
3:00
Speaker 2: It's still five percent.
3:01
Speaker 1: That's really interesting. So a call as such, should you
3:05
Speaker 1: should be getting three? But there are better rates than that,
3:08
Speaker 1: and you can still get up to five. This figure five,
3:11
Speaker 1: Can you frame it for us? Is it? Is it
3:14
Speaker 1: a term deposit? Is it? Do you have to keep
3:16
Speaker 1: it in for years?
3:17
Speaker 2: No, it's at call.
3:18
Speaker 3: There are a world of caveats around it though, because
3:21
Speaker 3: it's only for people aged eighteen to thirty four. I
3:25
Speaker 3: believe now it's from west packet that Westpac just increase
3:29
Speaker 3: the age bracket.
3:30
Speaker 2: So you have to be young. It unfortunately rules me
3:33
Speaker 2: out in a significant way. I would say, what's that?
3:37
Speaker 1: Yes, I get it, Yeah, okay, and.
3:39
Speaker 3: Looking for first home buyers, right, But you also then
3:41
Speaker 3: have to make twenty plus transactions on a linked bank
3:44
Speaker 3: account in any given month and grow.
3:46
Speaker 2: Your savings balance in a month.
3:47
Speaker 3: So there's lots of terms and conditions to qualify for
3:50
Speaker 3: that five percent rate. And let me tell you they
3:52
Speaker 3: are by themselves at that five percent ongoing rate. A
3:55
Speaker 3: competitive savings rate is more around the four point five mark.
3:59
Speaker 3: A competitive and realistic savings.
4:01
Speaker 1: Rape some well term deposits. I know that traditionally people
4:05
Speaker 1: were using things like mcquarie. I think has always been
4:09
Speaker 1: in the mix. Assn't I in g I'm naming these
4:11
Speaker 1: off the top of my head. There by no means promotions.
4:14
Speaker 1: Further one, let me tell you, do you have any
4:15
Speaker 1: sense of what are the most popular for investors or
4:19
Speaker 1: for people with serious levels of cash that are moving
4:22
Speaker 1: within the banking system. They don't have to be in
4:23
Speaker 1: the Big four.
4:25
Speaker 2: Yeah.
4:25
Speaker 3: So it's interesting to see because the Big four suddenly
4:27
Speaker 3: aren't posting the highest rates, the highest term deposit rates
4:30
Speaker 3: that I can see for any term is first option bank,
4:33
Speaker 3: but it's only a three month term at four point
4:35
Speaker 3: five percent, and these move around all the time. I've
4:37
Speaker 3: done this on the balance of fifty thousand dollars as well.
4:40
Speaker 3: Let's be clear, for a six month term deposit rate
4:43
Speaker 3: you're looking at in one bank, there are relatively new
4:45
Speaker 3: incomer at four point three eight percent, and then when
4:49
Speaker 3: you want to get into the one year, two years,
4:52
Speaker 3: three years, they're very much dominated by Judo Bank, Rabobank,
4:56
Speaker 3: move Bank, and they're sitting around that four percent mark.
5:00
Speaker 3: That's for the highest term deposit rates. If you're looking
5:03
Speaker 3: at the Big four, very different story.
5:05
Speaker 1: Just for the talk about the Big four. So you've
5:07
Speaker 1: seen four and a half percent on a extended time
5:10
Speaker 1: period term deposit two years or so, four and a
5:13
Speaker 1: half percent is what you should that's the maximum, it's
5:15
Speaker 1: what's possible.
5:17
Speaker 2: Oh only just that was for three months.
5:19
Speaker 3: I'm saying around the four percent mark, and you really
5:23
Speaker 3: have to stretch yourself to go and find that competitive rate.
5:26
Speaker 2: They're not that.
5:26
Speaker 3: Easy to find at four percent. Whereas you balance it
5:29
Speaker 3: up against the APT core savings accounts rates where you
5:32
Speaker 3: should easily be able to find an ongoing savings rate
5:35
Speaker 3: at four percent, You just in many cases have to
5:37
Speaker 3: meet some prickly monthly terms and conditions.
5:40
Speaker 2: And you mentioned.
5:41
Speaker 3: Mcquarie Bank before because they're one of the ones that
5:44
Speaker 3: have no strings attached savings account rates.
5:46
Speaker 2: So that might suit.
5:47
Speaker 3: People who are betting that there's not many more cash
5:51
Speaker 3: rate cuts to come and don't want the fuss of
5:54
Speaker 3: meeting certain terms and conditions. Mcquarie certainly is a leader
5:58
Speaker 3: in that space, but so is Able Banking and austrayan
6:01
Speaker 3: Unity Heartland Bank AMP. They're all offering no strings attached
6:06
Speaker 3: savings accounts that are at core with decent balance caps.
6:10
Speaker 2: Might I add.
6:11
Speaker 3: Anywhere between four point twenty five percent and four point
6:14
Speaker 3: five five percent?
6:15
Speaker 1: Okay? Then do they have these these are our called okay,
6:18
Speaker 1: and they have no strings attached. We take that as
6:21
Speaker 1: red hard to believe, but I'll take your word for it.
6:25
Speaker 2: Ah. The only string that I are the only obvious strings.
6:28
Speaker 3: So there's no age caps, there's no monthly terms in conditions.
6:31
Speaker 2: Some of them have welcome rates.
6:33
Speaker 3: But we're ignoring them completely because they only last for
6:36
Speaker 3: what four or five months maximum. The only cap I'm
6:38
Speaker 3: including is a balance cap. And so for example, I
6:41
Speaker 3: mentioned Astray and Unity. It has a balance cap of
6:44
Speaker 3: fifty thousand dollars, so as soon as you get just
6:47
Speaker 3: over fifty thousand dollars in that account, you won't get
6:49
Speaker 3: that high rate. But others like mcquarie offering four point
6:53
Speaker 3: two five percent, they've got a balance cap of two million.
6:57
Speaker 1: Right, so ironically if you put in more or your
7:00
Speaker 1: read actually might reduce on the amount over their cap time.
7:03
Speaker 2: Absolutely.
7:05
Speaker 3: Oh look, these accounts lit it with you know, age caps,
7:10
Speaker 3: balance cats, monthly caps, withdrawal caps, you name it. Same
7:14
Speaker 3: as accounts are absolutely littered with terms and conditions where
7:18
Speaker 3: if you put one foot wrong in any given month,
7:20
Speaker 3: you could see your interest rate go from like four
7:22
Speaker 3: and a half down to in some cases zero point
7:25
Speaker 3: zero zero percent.
7:26
Speaker 1: Yeah, that's a crucial point. That's a really good point.
7:29
Speaker 1: Keep that in mind, folks. This is literally it's become
7:32
Speaker 1: a game. And I think it would be innocent of
7:37
Speaker 1: you to go into a bank and think that you
7:38
Speaker 1: can put your money in and get a certain rate
7:40
Speaker 1: without some conditions. Some of them are more subtle than others,
7:44
Speaker 1: like the ones that at least just talking about caps,
7:46
Speaker 1: for instance, but they want to know how much you
7:49
Speaker 1: might wonder why they want to do that, But I
7:50
Speaker 1: suppose they just want more customers on these rates, So
7:54
Speaker 1: sally do the deposit rates then reflect it's starting to
8:00
Speaker 1: drop basically in anticipation of where we might be going
8:04
Speaker 1: on the cycle, because if Tim is right, and many
8:07
Speaker 1: economists are right, we are coming to the end of
8:08
Speaker 1: the cutting cycle.
8:11
Speaker 3: Yeah, it's interesting. I do think we're also coming to
8:13
Speaker 3: the end of the cutting cycle. Look, I'm going to
8:15
Speaker 3: throw it out there. We could be at the end already.
8:17
Speaker 3: We don't know certainly. You know, there's a meeting coming up,
8:21
Speaker 3: there's a lot of speculation about what might happen. But
8:24
Speaker 3: with inflation really still struggling to get back to that
8:27
Speaker 3: target band in a consistent manner, I do wonder whether
8:31
Speaker 3: we are already at the end. Certainly, if you've got
8:34
Speaker 3: money in the bank, if you've got a mortgage, you
8:36
Speaker 3: should not be banking or counting on something happening for.
8:40
Speaker 2: Certain because we just don't know.
8:43
Speaker 3: Looking at the Big four bank forecasts, and these could
8:45
Speaker 3: change in coming days when we get that inflation data.
8:48
Speaker 3: But looking at the big four banks, we've got A
8:52
Speaker 3: and Z, CBA and NAB all saying one more cut
8:56
Speaker 3: and West Facts still saying three, although I do feel
8:58
Speaker 3: like that.
8:58
Speaker 2: Forecast might change.
9:00
Speaker 1: That's change, that's yeah.
9:01
Speaker 3: That can give you a good idea of the spectrum.
9:04
Speaker 3: Three of the big four banks are saying no more
9:06
Speaker 3: cuts this year. West Pak is the only one saying
9:09
Speaker 3: one could come at the next meeting.
9:11
Speaker 2: But again time will tell when we get a better.
9:14
Speaker 3: Read on the inflation data and marry it up with
9:16
Speaker 3: the unemployment data. What's really interesting for the RBA at
9:19
Speaker 3: this point in time is that previously, when inflation was
9:22
Speaker 3: really running out of hand, it was really easy decisions
9:25
Speaker 3: for them to just know, hike and get inflation under control.
9:29
Speaker 3: Now that they've got inflation under control, the balancing act
9:33
Speaker 3: between their two key priorities keeping his strands in jobs
9:36
Speaker 3: and keeping inflation in check is becoming a lot harder.
9:40
Speaker 3: So I think that the decision making for the RBA
9:42
Speaker 3: is quite fought at this point in time.
9:45
Speaker 2: Now we're getting to the bottom of the cycle.
9:48
Speaker 1: And I suppose what's really important for our listeners I'm
9:50
Speaker 1: going to deal with this and in Moorman, folks, is that
9:53
Speaker 1: the banks don't hang around for the official rates to
9:58
Speaker 1: take their turn. They move off and the head of
10:01
Speaker 1: the future direction, so you might be thinking of fixing
10:04
Speaker 1: for the first time. They've been thinking about it for
10:07
Speaker 1: some time. Back in a moment, Hello and welcome back
10:18
Speaker 1: to The Australian's Money Puzzle podcast. I'm James Kirby and
10:21
Speaker 1: I'm talking to Sally Tindall, who is the data insights
10:24
Speaker 1: director at Canstar, the Comparison rate comparison service. You said
10:28
Speaker 1: something very interesting in the first segment which dovetails very
10:32
Speaker 1: much with what Tim Lowless is saying. And I've got
10:34
Speaker 1: two of you now. I've got someone who's in a
10:36
Speaker 1: cross rates and someone who's across property and they are
10:39
Speaker 1: both saying that we're coming to the end of the
10:42
Speaker 1: cycle and people are starting to think about fixing. I
10:47
Speaker 1: don't know if you're saying that, but tell us first
10:49
Speaker 1: of all, tell us the picture. I imagine no one's
10:51
Speaker 1: fixing right now and that activity has shrunk enormously because
10:55
Speaker 1: we've had a cutting cycle. I don't know is that
10:58
Speaker 1: the case.
11:00
Speaker 3: Ly, and I think I might need to take you
11:01
Speaker 3: on a little bit of a journey just to remind
11:03
Speaker 3: ourselves about Australians and our attitude towards fixing. So you know,
11:07
Speaker 3: often it's based on you know, an increasing fixing is
11:12
Speaker 3: often based on you know, strategic priorities for the banks,
11:16
Speaker 3: what the neighbor's doing, things like that, rather than whether
11:19
Speaker 3: we're at the top or the bottom of the cycle.
11:21
Speaker 3: But if you think about it strands, we might like
11:23
Speaker 3: to gamble on what two up or something, but we
11:26
Speaker 3: don't like to gamble on our mortgage when just not
11:29
Speaker 3: big fixes, I think because we're petrified of the break
11:32
Speaker 3: fees that still potentially come with fixed rates and if
11:35
Speaker 3: you want to.
11:36
Speaker 2: Get out early.
11:36
Speaker 3: So the peak of fixing was in July twenty twenty one,
11:41
Speaker 3: when forty six percent of new and refinance loans opted
11:44
Speaker 3: for a fix rate that wasn't even half And this
11:48
Speaker 3: was when the banks were offering in some cases four
11:51
Speaker 3: year fix rates that started with the one and only
11:54
Speaker 3: half of us opted to fix.
11:57
Speaker 2: Isn't that incredible? It is?
11:59
Speaker 1: It is really look back. I mean, what were people
12:01
Speaker 1: thinking it was going to go lower? It was still
12:03
Speaker 1: all forever, I wonder.
12:05
Speaker 2: But really I fixed for two years. I'm kicking myself.
12:09
Speaker 2: I didn't fix before. I was just so silly.
12:11
Speaker 3: But the second biggest peak in fixing in recent data
12:15
Speaker 3: was right before the GFC and that's when you know,
12:17
Speaker 3: interest rates are like a discount. A variable rate was
12:20
Speaker 3: sitting at I've looked it up eight point ninety six
12:22
Speaker 3: percent according to the RBA standard variable rates were over
12:26
Speaker 3: nine percent. People thought that rates would be getting over
12:29
Speaker 3: ten percent at one point and not everyone, but a
12:32
Speaker 3: lot of people about a quarter panic fixed at that point.
12:36
Speaker 2: And then what happened.
12:37
Speaker 1: Are people more likely to fix in our market out
12:40
Speaker 1: of fear that the rates are going too high than
12:42
Speaker 1: they are to take opportunity of the fact that they're
12:44
Speaker 1: super low.
12:45
Speaker 2: Well, I think it was a bit of both.
12:47
Speaker 3: So absolutely, back in just before the GFC, just before
12:50
Speaker 3: rates fell off a cliff yep, that was panic fixing,
12:53
Speaker 3: Absolutely because rates were sitting at the nine percent mark, right,
12:56
Speaker 3: But back you know, then fast forward to you know, COVID.
13:00
Speaker 3: Maybe there was a little bit of fear in there
13:02
Speaker 3: because it was the fear of unknown. Absolutely, but that
13:05
Speaker 3: was really driven by the banks offering incredibly sharp rates.
13:11
Speaker 3: And why were the banks offering incredibly sharp rates because
13:13
Speaker 3: they were working with the government, They were working with
13:15
Speaker 3: the RBA, and the RBA was handing them out cheap
13:18
Speaker 3: six rate funding. So again, it wasn't that we were
13:21
Speaker 3: at the bottom of the top of the cycle.
13:23
Speaker 2: So much as there was this other factor at play
13:26
Speaker 2: that we're.
13:26
Speaker 3: Driving people to actually lock in their rates, then the
13:29
Speaker 3: rate hikes happened.
13:31
Speaker 2: Everyone fled from fixing.
13:33
Speaker 3: The lowest rate of fixing was April twenty twenty four,
13:38
Speaker 3: so we were almost done with the cash rate hikes,
13:41
Speaker 3: and it was one point two percent of new and
13:43
Speaker 3: refinance loans.
13:44
Speaker 1: It fell from forty six to one one point two.
13:49
Speaker 1: What do you think it is right now?
13:52
Speaker 2: So we don't know.
13:53
Speaker 3: So the ABS unfortunately has stopped publishing this data, so
13:56
Speaker 3: we now crawl through the weeds of the big banks
14:00
Speaker 3: books so whenever they do half year or full year results.
14:03
Speaker 2: But it's still incredibly low.
14:04
Speaker 3: I do know that much because I'm looking at CBA's
14:07
Speaker 3: most recent results. They're full year results, and fixing is
14:10
Speaker 3: about one percent of new mortgages coming through and five
14:14
Speaker 3: percent of the whole loan book, and some of them
14:16
Speaker 3: will still have been you know, legacy fixes from back
14:19
Speaker 3: in twenty twenty one, twenty twenty two periods, So really
14:23
Speaker 3: incredibly low.
14:24
Speaker 2: Do you know why?
14:25
Speaker 3: Okay, so the big question is why, and you're about
14:27
Speaker 3: to ask me this, I know, but the lowest fix
14:30
Speaker 3: rate on our database is significantly lower than the lowest variable,
14:33
Speaker 3: even though there's.
14:34
Speaker 2: More one more cash rate cut to come.
14:36
Speaker 3: We don't know, but you know, I think that's because
14:39
Speaker 3: borrows aren't really sure how many cash rate cuts are
14:42
Speaker 3: still to come, and they really want to believe there's
14:44
Speaker 3: more than just one coming.
14:46
Speaker 1: Right, Yes, but no one rings a bell, of course,
14:48
Speaker 1: this is the thing, right, No one rings a bell
14:50
Speaker 1: at the bottom, and no one rings a bell at
14:51
Speaker 1: the top.
14:52
Speaker 3: And you can never be certain except with the you know,
14:55
Speaker 3: clarity of hindsight. And the penalties for fixing and often
15:00
Speaker 3: be far more significant than the penalties for getting it
15:04
Speaker 3: wrong un variable.
15:05
Speaker 1: I have two things here. The first thing I want
15:07
Speaker 1: to just before we talk about the penalties, is there
15:10
Speaker 1: anything like an average long term average of fixing.
15:15
Speaker 2: I don't have it, Handy.
15:16
Speaker 1: It sounds like if it was one, it was, it
15:17
Speaker 1: would tell us very little anyway, because if it ranges
15:20
Speaker 1: from forty six to one. Yeah, So like the average
15:23
Speaker 1: Meltbourne temperature in January, you know, twenty eight degrees doesn't
15:25
Speaker 1: tell you anything.
15:26
Speaker 3: I'm going to take a punch and I'm going to
15:28
Speaker 3: say somewhere between five and ten percent, I'd say it's
15:31
Speaker 3: always been low.
15:33
Speaker 1: Okay, all right, Now about the penalties, I thought in
15:36
Speaker 1: my naivity that the penalties were more or less gone.
15:40
Speaker 2: So exit fees on mortgages are gone.
15:43
Speaker 3: They hit the curb twenty ten or twenty twelve, one
15:46
Speaker 3: of those two years, but a long time ago. Previously
15:49
Speaker 3: banks could sting you, whether you were on a fixed
15:51
Speaker 3: or weariable rate, for exiting your mortgage before your thirty
15:55
Speaker 3: years are up, and they were astronomical fees, and so
15:59
Speaker 3: they've gone. Now there are fees for applying for a
16:02
Speaker 3: home loan. There are fees for discharging a home loan,
16:05
Speaker 3: but they're relatively small at about three hundred and fifty
16:08
Speaker 3: dollars for those discharge fees, different to exit fees. There's
16:12
Speaker 3: some state government fees for you know, switching.
16:15
Speaker 2: Lenders as well and things like that.
16:17
Speaker 3: But you know, all in all, we estimate that someone
16:20
Speaker 3: that's switching their mortgage is paying what about one to
16:24
Speaker 3: one and a half thousand dollars in fees, some of
16:27
Speaker 3: which are negotiable. So there's not those big exit fee
16:31
Speaker 3: penalties on variable rates. But if you sign up to
16:35
Speaker 3: a fixed rate and you said to the bank, yes,
16:37
Speaker 3: I'm going to pay a fixed rate of five percent
16:40
Speaker 3: for the next two years, and you break that contract
16:43
Speaker 3: early and the bank is out of pocket because you
16:46
Speaker 3: broke that contract, they are entitled to charge you what
16:50
Speaker 3: they're out of pocket costs.
16:52
Speaker 1: Okay, and they can I see.
16:54
Speaker 3: And sometimes yeah, sometimes these are negotiable and sometimes I've
17:00
Speaker 3: can depend on where your next step is. So if
17:03
Speaker 3: you say to your bank, I really just want to
17:04
Speaker 3: move to a more competitive fixed rate, they might wait
17:07
Speaker 3: the feats. If you say, I want to stick with you,
17:09
Speaker 3: but I want to go to variable, but I'm going
17:12
Speaker 3: to stay with you, guys, maybe they'll negotiate those fees.
17:15
Speaker 2: It's always worth having that conversation.
17:17
Speaker 1: And obviously the worst one is if you see I
17:19
Speaker 1: can't do it anymore and I'm leaving you entirely, then
17:22
Speaker 1: obviously why wouldn't they impose their charges that they can legally? Okay,
17:27
Speaker 1: So million dollar question, if I talked to you this
17:31
Speaker 1: time next year, what do you think the fixed ratio
17:34
Speaker 1: will be. Do you think if we have no more cuts,
17:37
Speaker 1: and if we find clear stabilization and if the cycle
17:40
Speaker 1: is clearly over, do you think we'll see a lift
17:43
Speaker 1: in the number of people fixing or at least considering it.
17:46
Speaker 3: I do think we'll see a lift in the number
17:48
Speaker 3: of people fixing, but I don't think it'll be a
17:51
Speaker 3: significant one. I'm not going back to the days of
17:53
Speaker 3: where we were close to half of the people.
17:55
Speaker 2: Opting for a fixed rate.
17:56
Speaker 3: I think some of those people that tried out fixing,
17:59
Speaker 3: perhaps for the firs time, in that period of record
18:02
Speaker 3: low rates, really liked the certainty that it brought. I
18:05
Speaker 3: certainly know that from talking to you know, friends who've
18:09
Speaker 3: you know, always interested in working out you know, what's
18:12
Speaker 3: happening with fixed rates because they want to fix again
18:14
Speaker 3: because they liked that certainty. So I do think that
18:18
Speaker 3: perhaps that period of low rates has encouraged people and
18:21
Speaker 3: opens people's minds to that certainty where I think fixing
18:25
Speaker 3: gets problematic and where you know, we won't see these shots.
18:29
Speaker 3: Why we won't see this sharp space spike, brother is
18:32
Speaker 3: because the break fees problematic.
18:34
Speaker 2: But also fixed rates tend to be a lot.
18:37
Speaker 3: Less flexible, so you typically can't get an offset account
18:41
Speaker 3: with them. You typically have caps on how much extra
18:44
Speaker 3: you can pay in that fixed rate term, and again
18:46
Speaker 3: that turns some people off. Although you know, some people
18:50
Speaker 3: do then have a foot in both camps, opt for
18:53
Speaker 3: a split loan, you know, take a gamble each way,
18:56
Speaker 3: but also get the flexibility that a variable rate can
18:58
Speaker 3: bring on that portion of their homeland, take advantage of
19:02
Speaker 3: an offset account whatever they want, and then have that
19:04
Speaker 3: security from the fixed rates.
19:06
Speaker 2: So it's about.
19:07
Speaker 3: Working out what suits your finances but also your personality,
19:11
Speaker 3: because there's some people that hate, absolutely hate the idea
19:15
Speaker 3: of locking in a rate and then seeing variable rates
19:18
Speaker 3: fullfill further that's just yes, horrifying to them, whereas other
19:23
Speaker 3: people absolutely hate worrying about THERBA like day in and
19:27
Speaker 3: day out, although it's only eight meetings a year now,
19:29
Speaker 3: so it's helpful.
19:30
Speaker 1: And those people who will be horrified to have not
19:33
Speaker 1: taken a fixed rate and watched the variables climb. And
19:38
Speaker 1: the thing about the split chorus, folks, is that you've
19:40
Speaker 1: got two sets of numbers, you've got two sets of fees.
19:43
Speaker 1: I've done it, I've done all the variations. Actually, what
19:45
Speaker 1: advisors say for what it's worth, and I'm always talking
19:48
Speaker 1: to advisers and talk to some of the best advisors
19:50
Speaker 1: in the country. What they do tend to see is
19:53
Speaker 1: don't gamble, don't fix to best against the bank, because
19:57
Speaker 1: you probably never win. But if you're a fixer, fix consistently,
20:01
Speaker 1: so for instance, you have a home mortgage and you
20:04
Speaker 1: had it for twenty years and you had four sets
20:06
Speaker 1: of five year fixes, you'll find that it smooths out
20:08
Speaker 1: really nicely over that period of time. And what your
20:12
Speaker 1: advantage falls back largely to what Sally is saying, which
20:15
Speaker 1: is you actually can do your numbers and you can
20:17
Speaker 1: be sure of what your numbers are. I think that
20:19
Speaker 1: is actually the ultimate comfort. Whether you win or lose
20:22
Speaker 1: against the bank. You know, you may win for a
20:24
Speaker 1: passage of play, a passage of time, and you might
20:26
Speaker 1: lose for another part. But really it's about the security
20:29
Speaker 1: of it. That's really good Sally, and very interesting terrific
20:32
Speaker 1: I think for us, I haven't seen many people talk
20:35
Speaker 1: about this. It's about time we did. All right, we'll
20:37
Speaker 1: be back in a moment. Hello, Welcome back to The
20:47
Speaker 1: Australian's Money Puzzle podcast. James Kirby here with Sally Tindle
20:51
Speaker 1: of Canstar, regular guests on the show. Terrific guest to
20:54
Speaker 1: give us a picture of where it's all going in
20:57
Speaker 1: terms of the market. Both your money in the bank,
21:01
Speaker 1: which is just to recap if I get any of
21:03
Speaker 1: this wrong, Tanby Sally, you're talking fours is a good
21:07
Speaker 1: way to get now with with deposits and term deposits,
21:11
Speaker 1: et cetera, and three is sort of working average across
21:14
Speaker 1: the banks. And we'll put all that, We'll put all
21:16
Speaker 1: the tricks and caps and everything else to one side
21:19
Speaker 1: for the moment.
21:20
Speaker 2: That's really interesting in clearly lovely yes.
21:25
Speaker 1: And on the borrowing side, no one is fixing. No
21:30
Speaker 1: one is fixing all right. Of course it's not fixing
21:32
Speaker 1: because the rates have been dropping. But if you fix,
21:35
Speaker 1: what if you fix now? What if you fixed at
21:39
Speaker 1: these levels at four percent, say, and then it floated
21:43
Speaker 1: back up to eight or nine. Well, I've seen it
21:45
Speaker 1: all happen. Let me tell you. I've seen it all happen.
21:47
Speaker 1: I've seen people fixing the I remember people fixing at
21:50
Speaker 1: thirteen percent, Sally because they were worried it was going
21:53
Speaker 1: to go higher.
21:54
Speaker 2: So you see to that panic fixing.
21:56
Speaker 1: Panic fixing, Yeah, that's right.
21:58
Speaker 3: The driver is you know what your neighbor's doing, and
22:02
Speaker 3: sometimes it's because your neighbor's panicking and you feel like
22:04
Speaker 3: you should panic too. And I think that's the key
22:07
Speaker 3: with so many things relating to finance is just because
22:10
Speaker 3: what your neighbor do doesn't automatically make it a perfect
22:13
Speaker 3: idea for you. You've got to understand what suits your finances.
22:17
Speaker 3: It's so important. But also don't make any decision in
22:19
Speaker 3: a rush. Sometimes these things come with limited time specials
22:22
Speaker 3: things like that nothing should be rushed if you need
22:25
Speaker 3: to talk through it with a mortgage broker or a
22:27
Speaker 3: financial advisor, your accountant, your neighbor, your family friend, take
22:32
Speaker 3: that time to work it out and work out what
22:34
Speaker 3: suits your finances. And what I did want to say
22:37
Speaker 3: before is you know, if you are thinking about fixing,
22:39
Speaker 3: there is a world of difference between say the Big
22:43
Speaker 3: four bank fix rates lowest fix rates and then the
22:46
Speaker 3: lowest on the market. We've got the lowest on the
22:48
Speaker 3: market on our database at the moment at four point
22:51
Speaker 3: six four percent four point six four percent, whereas Westpac
22:56
Speaker 3: leading the way for the big banks at four eight
22:59
Speaker 3: nine percent for two years at this point in time.
23:02
Speaker 3: But most of the other fix rates on offer from
23:05
Speaker 3: the big four banks are sitting there with a five
23:07
Speaker 3: in front of it rather than a four. So you know,
23:10
Speaker 3: if you are going to fix, go find yourself Gooddale.
23:13
Speaker 1: Yes, okay, and be strategic and not panic. All right,
23:16
Speaker 1: Very interesting, A quick couple of quick questions. I just
23:20
Speaker 1: wanted to try and cover them if I could, John
23:22
Speaker 1: j o N. John James. A recent episode you brought
23:26
Speaker 1: up the question asked you whether there was a level
23:28
Speaker 1: of employer mandated super at which someone should be allowed
23:31
Speaker 1: to choose to have this paid via their way as
23:34
Speaker 1: opposed to having it forced into super. This was me
23:36
Speaker 1: talking about the sg guarantee now being at twelve percent
23:39
Speaker 1: and being high I think across the board. Anyway, John
23:42
Speaker 1: points out that there is a thing called the maximum
23:44
Speaker 1: super Contribution base and it tends to be most applicable
23:48
Speaker 1: to higher owners, whereby the standard sg C, you know,
23:53
Speaker 1: the twelve percent applied against your income would result in
23:56
Speaker 1: breaching the concession and contribution cap which is currently thirty k,
24:00
Speaker 1: and thereby in occurring higher taxes. Yeah, that's there. That's
24:04
Speaker 1: very true, John, Thank you for pointing that out. I mean,
24:06
Speaker 1: you don't have to nobody has to be penalized for
24:09
Speaker 1: paying their SGC. There is that opt out if you like,
24:12
Speaker 1: the maximum super contribution base, which many people would be
24:15
Speaker 1: hitting at this stage when it's twelve percent and it's
24:18
Speaker 1: only thirty grand max contribution. Well, you don't have to
24:22
Speaker 1: do your numbers for long to see how many people
24:24
Speaker 1: would be caught there. Thank you very much, John. I
24:25
Speaker 1: can't cover the rest of your expansive note, but that
24:29
Speaker 1: was very useful. Okay, Adam says, I was alarmed to
24:32
Speaker 1: hear you describe our treasure as shrewd. Battery finally reluctantly
24:38
Speaker 1: and begrudgingly succumbed to common sense on the superannuation meddling, sorry,
24:42
Speaker 1: the super reforms he has been peddling. Okay, well this
24:46
Speaker 1: is from Adam. I said he was politically shrewd, and
24:49
Speaker 1: I'll stand by that because that was a daft policy.
24:52
Speaker 1: He shouldn't have gone ahead with it, and he hasn't.
24:54
Speaker 1: That is the unrealized gains.
24:55
Speaker 3: Just a comment about that annuation backflip that Jim Thomas did.
25:00
Speaker 2: I just thought it was more like a half twist
25:02
Speaker 2: rather than twist. We'll say not half, did I miss well,
25:07
Speaker 2: kept half of it twisted on the other half.
25:09
Speaker 1: Yeah, Oh no, I know what you're saying.
25:11
Speaker 2: It'd be interesting to say if it gets through.
25:13
Speaker 1: I mean, cut to the chase, the tax on super
25:17
Speaker 1: earnings on super amounts above three million have suddenly doubled
25:21
Speaker 1: from fifteen percent to thirty. So there you go, as
25:23
Speaker 1: you say, half twist. Yeah, maybe he's half successful, maybe
25:26
Speaker 1: he's half shrewd.
25:28
Speaker 2: All right.
25:30
Speaker 1: The other point, then, that Adam really wants to make
25:32
Speaker 1: is about Melbourne, where we have people on the show
25:36
Speaker 1: saying it is the bargain basement in the national market.
25:38
Speaker 1: Right now, we've had several people saying it. We've had
25:42
Speaker 1: very few people undermining that concept. Adam says, the idea
25:46
Speaker 1: someone would want to invest money in the economy down
25:49
Speaker 1: there is alarming. I keep hearing how cheap it is
25:52
Speaker 1: a great time to buy, and can't help but see
25:56
Speaker 1: a correlation to Jim Charmers blind refusal to see what
26:00
Speaker 1: everybody else can see. The Victorian government debt is now
26:02
Speaker 1: growing at two million an hour. I honestly think the
26:06
Speaker 1: issues are terrifying, and I can't help think that so
26:09
Speaker 1: many people must put their head the sand down there.
26:11
Speaker 1: And he mentions other things like crime et cetera, and lawlessness. Okay, well,
26:16
Speaker 1: deep breath, it's the second biggest city and the prices
26:20
Speaker 1: are clearly the lowest in the land of all the
26:22
Speaker 1: metropolitan capitals. They're trailing behind. And if you even had
26:27
Speaker 1: to return to anything like remotely like historical averages, I
26:30
Speaker 1: think there would be investors would do very well. And
26:33
Speaker 1: investors are I know anecdotally. I haven't got the stats
26:36
Speaker 1: for you, but I talk to advisors all the time
26:38
Speaker 1: and they are bringing investors into Melbourne across. So yes,
26:41
Speaker 1: the issue of the death et cetera is is, I
26:44
Speaker 1: think is a big issue. I don't know so much
26:46
Speaker 1: about the crime, whether that's a big issue living in city.
26:49
Speaker 1: I look, it hasn't affected me in any fashion or way.
26:53
Speaker 1: What do you think, Sally about Melbourne has a bargain basement.
26:57
Speaker 2: You pass those prices, right.
26:59
Speaker 1: It's hard to go past the prices.
27:00
Speaker 3: Yeah, it's right when you look at the cost of
27:04
Speaker 3: buying just a simple unit in Sydney and Brisbane these days,
27:08
Speaker 3: you know, even Adelaid's going gangbusters.
27:10
Speaker 2: In many ways, Melbourne is looking increasingly attractive.
27:13
Speaker 3: I think there's a lot of nerves though, and I
27:15
Speaker 3: think that's coming through in that email of you know.
27:18
Speaker 2: The government is in debt.
27:19
Speaker 3: The government has made some decisions that can impact people
27:24
Speaker 3: like investors. They're worried probably that there's more to come
27:27
Speaker 3: in those decision making and there, and that probably has
27:30
Speaker 3: contributed to some of the you know cooling in prices there.
27:35
Speaker 3: But people need places to live, and they need places
27:38
Speaker 3: to live in employment hubs where there's good transport and
27:43
Speaker 3: you know, there's you know, opportunities for education, and so
27:46
Speaker 3: I do think that you know, Melbourne will I think
27:51
Speaker 3: probably pick up pace as you know, as the months
27:55
Speaker 3: and years unfold.
27:57
Speaker 2: I think it might take a little bit of time though.
28:00
Speaker 1: Isn't it very interesting? And thank you very much for
28:02
Speaker 1: that stimulating peace of correspondence, Adam, Thank you very much. Okay,
28:06
Speaker 1: keep them rolling the money puzzle at the Australian dot
28:09
Speaker 1: com dot au for any questions, comments, observations, complaints. They're
28:14
Speaker 1: all welcome, and so was Sally. Thank you very much, Sally.
28:18
Speaker 1: Great to have you on the show again. Always terrific
28:20
Speaker 1: to talk to you. Thanks and talk to you soon.