Fixed rates step into spotlight

Tuesday, August 24th 2010, 2:26PM

The gap between floating rates and fixed rates is closing in. This is because floating rates have been increasing in synch with the last two Official Cash Rate (OCR) increases of 25 basis points, making an increase of 0.50% since June. At the same time there has also been a fall in two to five year fixed rates due to the decline in wholesale and swap rates.

Whereas six months ago the "step up" between floating and two-years fixed was around 1.60%, at the moment it stands at around 0.60%.

This means at the moment you would only need to see a small rise in rates for the fixing strategy to be the better option, especially for terms between one and two years.

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