And why not? But are you prepared?

To better understand why a 3 year fixed rate today at just 1.99% may be the best value since the 1.99% 5 year fixed rate offered in February 2021, let's start with a bit of background first ...

USD$30+ trillion (AUD$40+ trillion equivalent)

Global governments spent over USD$30 trillion dollars in global stimulus over the last 18 months, and it will end in super charged stagflation.

We wrote about this on 24 August 2020.


Best time since 2009 to have fixed for 5 years

On 15 December 2020 we wrote about the case for a 5 year fixed interest rate at 1.99%


and we reiterated this on 28 February 2021 with the best opportunity since 2009 to fix for a term of 5 years


In the below chart the green line (5 year fixed rate) has now moved much higher and is well above the red line (variable rate) and the blue line (implied variable rate paid).

Those that heard our arguments in favour for fixing for 5 years and got an amazing 1.99% fixed interest rate between the two post above you have done exceptionally well and you may do even much much better in the next few years. Well done.

What now?

Those that were hesitant and unsure about fixing for 5 years at the time, your best bet at the moment is to consider fixing for 3 years.

The lenders that offer 1.99% for 3 year fixed rates are, in no particular order, 86400, AMP, Citibank and Suncorp. There are also handfull of lenders in the low 2.10%, if you want more choice of lenders.

In the below chart the green line (3 year fixed rate) is well below the red line (variable rate) and the blue line (implied variable rate paid).

Unsure or sceptical?

Fair enough, you are not alone, because the Governor of the Reserve Bank on 4 September 2021, had a go at the Interest Rate Swap (IRS) market because of differing views on the expected path of the official cash rate.


Consider this, and decide if this is a gift or not and how long will lenders keep the rate at 1.99%!

3 year fixed rates are priced over the 3 year interest rate swap. Since early November 2020 the 3 year swap rate moved from 0.06% to 0.76% as of close of business Friday, 15 October 2021. A huge movement because the Reserve Bank has yield control, i.e., surpresses, the 3 year bond interest rate at just 0.10%.

Yet a handful of lenders are offering 3 year fixed home loan interest rates at 1.99%.

Remember this

The implosion will first start in the bond market (resulting in much much higher rates), well it has already began on October 2020 (refer 17 February 2021 post) and then it will spread to every other bubble.


and since 17 February 2021 the 10 year bond yield has moved higher to 1.65% from 1.42%.

It cannot much worse than this


Or can it?