SHOULD I FIX OR STAY VARIABLE? (September 2020)


The bond market, especially the very long end of the bond market (10 years and over), is very susceptable to a significant sell off because of the re-inflation risks taken by the Federal Reserve and other Central Banks. Staglfation may come back to haunt Central Banks.

The mood of the bond market can change at any time. We frequenlty monitor movements in the bond market.

We shall stick with the default option of staying variable for the time being.

If you need further information, please let us know.

The below chart compares the performance of the 3 year fixed rate to the variable rate since 1990.

In brief, the

Red line is the variable interest rate applicable at that point in time.

Green line is the 3-year fixed rate applicable at that point in time.

Blue line is the variable interest rate paid at that point in time over the 3-year comparison term, calculated on the variable interest rates applicable over the 3-year term.

How to Interpret the Chart At any point in time, if the green line is below the blue line then it would have been better to have fixed rather than stay variable. The difference between the green and blue lines is the implied savings if you fixed (and vice a versa).