Fixed Rates RISE....

Fixed rates have been making a steady march north the last few weeks, and we can see on the "rate tracker" at the Sydney Futures Exchange http://www.asx.com.au/sfe/targetratetracker.htm that market expectations for any further rate cuts have almost hit zero. Some commentators are now suggesting we may see a variable rate rise before the end of the year - the market is suggesting early 2010.

CBA/Colonial customers, who had been enjoying the best rate in town were bumped up 0.1% last week as CBA brought their variable rate back in-line with everyone else.

But what should you do? My feeling is that we have seen the best of the fixed rates for a time. I expect variable rates will increase over the next 12months and I suggest investors (and home owners) start factoring in repayments at higher levels - such as current fixed rates. If you start doing this now, then you will be ahead in repayments (or have a savings buffer) as well as being 'used' to it. If rates rise soon, you will be prepared, if they dont rise for a while, then you have simply increased yours savings/buffer for when they do rise.

History tells us these rates are low - they go down, but then they go up. Successful investors ride the cycle.

That said, if you see a good 'special' and like the security of some fixed rates, then that is the time to opportunistically lock in. Otherwise, why bet against the banks?

[Fiona currently has 52% of her finance on fixed rates from 1-3yrs.]