Hello and welcome to the Australians Money Puzzle podcast.

I'm James Kirby.

Welcome aboard everybody.

If you're a regular listener to the show and you tuned in last Tuesday the Property Show to hear Tim Lowles, the head of research at the property research group Cautality.

He really caught my attention with something.

A lot of property investors may not have considered this just yet, or homeowners for that matter.

But Tim Lowless said, we're getting close to the bottom of the interest rate cutting cycle and if there's another cut on Melbourne Cup Day, which is likely ish, it means we may not see one as expected early next year.

And then I am quoting Tim here.

And remember that this guy is now this is his whole thing, Okay, property stats, interest rates research, where the market is moving.

And he said more people are starting to do their numbers, aren't fixing and are weighing up the pros and cons.

Isn't that interesting?

So I thought, well, let's get someone to talk about that who would be good on that.

The ideal person, of course is Sally Tindle, a can star.

We're going to talk about that.

We're going to talk first about the whole situation with rates and where they're going on, how much you get for your money, and then we'll go into the idea of fixing.

Oh are you Sally, I'm great, James, how are you good?

Nice to have you on again.

I really think that investors should tune in here because there is a point in time, but you might just give us an entrade to this entire situation and tell us like basically where we are right.

We've had this cutting cycle.

It's been going on for some time.

We think we're coming towards the end.

I go for money in the banks as opposed to borrowing from them.

What's this what sort of guideline at the moment?

What are people getting on deposit and what would be the best rates at the stage.

It's really interesting to look at the numbers because we saw on the way up, with all the interest rate hikes.

On the way down, banks are still picking and choosing which savings accounts get a cut, which might miss out, which is a good thing in a cutting cycle, or they might they might be juggling between base rates and bonus rates to make their profit margins still stack up.

So before the hikes, we saw.

The average ongoing savings rate at zero point three nine percent.

I mean, that's just ridiculous, isn't it.

At the peak it was three point four to three percent, and then today is three point zero six percent.

So banks on.

The way up didn't pass on all the rate hikes on the way down, they haven't passed through all the rate cuts when you're looking at those average rates.

But there's a world of difference between an average rate and a competitive one.

So I just said three point zero six that's the average ongoing savings rate on our database at this point in time.

It's excluding kids accounts.

I believe today the highest ongoing savings rate is five percent.

It's still five percent.

That's really interesting.

So a call as such, should you should be getting three?

But there are better rates than that, and you can still get up to five.

This figure five, Can you frame it for us?

Is it?

Is it a term deposit?

Is it?

Do you have to keep it in for years?

No, it's at call.

There are a world of caveats around it though, because it's only for people aged eighteen to thirty four.

I believe now it's from west packet that Westpac just increase the age bracket.

So you have to be young.

It unfortunately rules me out in a significant way.

I would say, what's that?

Yes, I get it, Yeah, okay, and.

Looking for first home buyers, right, But you also then have to make twenty plus transactions on a linked bank account in any given month and grow.

Your savings balance in a month.

So there's lots of terms and conditions to qualify for that five percent rate.

And let me tell you they are by themselves at that five percent ongoing rate.

A competitive savings rate is more around the four point five mark.

A competitive and realistic savings.

Rape some well term deposits.

I know that traditionally people were using things like mcquarie.

I think has always been in the mix.

Assn't I in g I'm naming these off the top of my head.

There by no means promotions.

Further one, let me tell you, do you have any sense of what are the most popular for investors or for people with serious levels of cash that are moving within the banking system.

They don't have to be in the Big four.

Yeah.

So it's interesting to see because the Big four suddenly aren't posting the highest rates, the highest term deposit rates that I can see for any term is first option bank, but it's only a three month term at four point five percent, and these move around all the time.

I've done this on the balance of fifty thousand dollars as well.

Let's be clear, for a six month term deposit rate you're looking at in one bank, there are relatively new incomer at four point three eight percent, and then when you want to get into the one year, two years, three years, they're very much dominated by Judo Bank, Rabobank, move Bank, and they're sitting around that four percent mark.

That's for the highest term deposit rates.

If you're looking at the Big four, very different story.

Just for the talk about the Big four.

So you've seen four and a half percent on a extended time period term deposit two years or so, four and a half percent is what you should that's the maximum, it's what's possible.

Oh only just that was for three months.

I'm saying around the four percent mark, and you really have to stretch yourself to go and find that competitive rate.

They're not that.

Easy to find at four percent.

Whereas you balance it up against the APT core savings accounts rates where you should easily be able to find an ongoing savings rate at four percent, You just in many cases have to meet some prickly monthly terms and conditions.

And you mentioned.

Mcquarie Bank before because they're one of the ones that have no strings attached savings account rates.

So that might suit.

People who are betting that there's not many more cash rate cuts to come and don't want the fuss of meeting certain terms and conditions.

Mcquarie certainly is a leader in that space, but so is Able Banking and austrayan Unity Heartland Bank AMP.

They're all offering no strings attached savings accounts that are at core with decent balance caps.

Might I add.

Anywhere between four point twenty five percent and four point five five percent?

Okay?

Then do they have these these are our called okay, and they have no strings attached.

We take that as red hard to believe, but I'll take your word for it.

Ah.

The only string that I are the only obvious strings.

So there's no age caps, there's no monthly terms in conditions.

Some of them have welcome rates.

But we're ignoring them completely because they only last for what four or five months maximum.

The only cap I'm including is a balance cap.

And so for example, I mentioned Astray and Unity.

It has a balance cap of fifty thousand dollars, so as soon as you get just over fifty thousand dollars in that account, you won't get that high rate.

But others like mcquarie offering four point two five percent, they've got a balance cap of two million.

Right, so ironically if you put in more or your read actually might reduce on the amount over their cap time.

Absolutely.

Oh look, these accounts lit it with you know, age caps, balance cats, monthly caps, withdrawal caps, you name it.

Same as accounts are absolutely littered with terms and conditions where if you put one foot wrong in any given month, you could see your interest rate go from like four and a half down to in some cases zero point zero zero percent.

Yeah, that's a crucial point.

That's a really good point.

Keep that in mind, folks.

This is literally it's become a game.

And I think it would be innocent of you to go into a bank and think that you can put your money in and get a certain rate without some conditions.

Some of them are more subtle than others, like the ones that at least just talking about caps, for instance, but they want to know how much you might wonder why they want to do that, But I suppose they just want more customers on these rates, So sally do the deposit rates then reflect it's starting to drop basically in anticipation of where we might be going on the cycle, because if Tim is right, and many economists are right, we are coming to the end of the cutting cycle.

Yeah, it's interesting.

I do think we're also coming to the end of the cutting cycle.

Look, I'm going to throw it out there.

We could be at the end already.

We don't know certainly.

You know, there's a meeting coming up, there's a lot of speculation about what might happen.

But with inflation really still struggling to get back to that target band in a consistent manner, I do wonder whether we are already at the end.

Certainly, if you've got money in the bank, if you've got a mortgage, you should not be banking or counting on something happening for.

Certain because we just don't know.

Looking at the Big four bank forecasts, and these could change in coming days when we get that inflation data.

But looking at the big four banks, we've got A and Z, CBA and NAB all saying one more cut and West Facts still saying three, although I do feel like that.

Forecast might change.

That's change, that's yeah.

That can give you a good idea of the spectrum.

Three of the big four banks are saying no more cuts this year.

West Pak is the only one saying one could come at the next meeting.

But again time will tell when we get a better.

Read on the inflation data and marry it up with the unemployment data.

What's really interesting for the RBA at this point in time is that previously, when inflation was really running out of hand, it was really easy decisions for them to just know, hike and get inflation under control.

Now that they've got inflation under control, the balancing act between their two key priorities keeping his strands in jobs and keeping inflation in check is becoming a lot harder.

So I think that the decision making for the RBA is quite fought at this point in time.

Now we're getting to the bottom of the cycle.

And I suppose what's really important for our listeners I'm going to deal with this and in Moorman, folks, is that the banks don't hang around for the official rates to take their turn.

They move off and the head of the future direction, so you might be thinking of fixing for the first time.

They've been thinking about it for some time.

Back in a moment, Hello and welcome back to The Australian's Money Puzzle podcast.

I'm James Kirby and I'm talking to Sally Tindall, who is the data insights director at Canstar, the Comparison rate comparison service.

You said something very interesting in the first segment which dovetails very much with what Tim Lowless is saying.

And I've got two of you now.

I've got someone who's in a cross rates and someone who's across property and they are both saying that we're coming to the end of the cycle and people are starting to think about fixing.

I don't know if you're saying that, but tell us first of all, tell us the picture.

I imagine no one's fixing right now and that activity has shrunk enormously because we've had a cutting cycle.

I don't know is that the case.

Ly, and I think I might need to take you on a little bit of a journey just to remind ourselves about Australians and our attitude towards fixing.

So you know, often it's based on you know, an increasing fixing is often based on you know, strategic priorities for the banks, what the neighbor's doing, things like that, rather than whether we're at the top or the bottom of the cycle.

But if you think about it strands, we might like to gamble on what two up or something, but we don't like to gamble on our mortgage when just not big fixes, I think because we're petrified of the break fees that still potentially come with fixed rates and if you want to.

Get out early.

So the peak of fixing was in July twenty twenty one, when forty six percent of new and refinance loans opted for a fix rate that wasn't even half And this was when the banks were offering in some cases four year fix rates that started with the one and only half of us opted to fix.

Isn't that incredible?

It is?

It is really look back.

I mean, what were people thinking it was going to go lower?

It was still all forever, I wonder.

But really I fixed for two years.

I'm kicking myself.

I didn't fix before.

I was just so silly.

But the second biggest peak in fixing in recent data was right before the GFC and that's when you know, interest rates are like a discount.

A variable rate was sitting at I've looked it up eight point ninety six percent according to the RBA standard variable rates were over nine percent.

People thought that rates would be getting over ten percent at one point and not everyone, but a lot of people about a quarter panic fixed at that point.

And then what happened.

Are people more likely to fix in our market out of fear that the rates are going too high than they are to take opportunity of the fact that they're super low.

Well, I think it was a bit of both.

So absolutely, back in just before the GFC, just before rates fell off a cliff yep, that was panic fixing, Absolutely because rates were sitting at the nine percent mark, right, But back you know, then fast forward to you know, COVID.

Maybe there was a little bit of fear in there because it was the fear of unknown.

Absolutely, but that was really driven by the banks offering incredibly sharp rates.

And why were the banks offering incredibly sharp rates because they were working with the government, They were working with the RBA, and the RBA was handing them out cheap six rate funding.

So again, it wasn't that we were at the bottom of the top of the cycle.

So much as there was this other factor at play that we're.

Driving people to actually lock in their rates, then the rate hikes happened.

Everyone fled from fixing.

The lowest rate of fixing was April twenty twenty four, so we were almost done with the cash rate hikes, and it was one point two percent of new and refinance loans.

It fell from forty six to one one point two.

What do you think it is right now?

So we don't know.

So the ABS unfortunately has stopped publishing this data, so we now crawl through the weeds of the big banks books so whenever they do half year or full year results.

But it's still incredibly low.

I do know that much because I'm looking at CBA's most recent results.

They're full year results, and fixing is about one percent of new mortgages coming through and five percent of the whole loan book, and some of them will still have been you know, legacy fixes from back in twenty twenty one, twenty twenty two periods, So really incredibly low.

Do you know why?

Okay, so the big question is why, and you're about to ask me this, I know, but the lowest fix rate on our database is significantly lower than the lowest variable, even though there's.

More one more cash rate cut to come.

We don't know, but you know, I think that's because borrows aren't really sure how many cash rate cuts are still to come, and they really want to believe there's more than just one coming.

Right, Yes, but no one rings a bell, of course, this is the thing, right, No one rings a bell at the bottom, and no one rings a bell at the top.

And you can never be certain except with the you know, clarity of hindsight.

And the penalties for fixing and often be far more significant than the penalties for getting it wrong un variable.

I have two things here.

The first thing I want to just before we talk about the penalties, is there anything like an average long term average of fixing.

I don't have it, Handy.

It sounds like if it was one, it was, it would tell us very little anyway, because if it ranges from forty six to one.

Yeah, So like the average Meltbourne temperature in January, you know, twenty eight degrees doesn't tell you anything.

I'm going to take a punch and I'm going to say somewhere between five and ten percent, I'd say it's always been low.

Okay, all right, Now about the penalties, I thought in my naivity that the penalties were more or less gone.

So exit fees on mortgages are gone.

They hit the curb twenty ten or twenty twelve, one of those two years, but a long time ago.

Previously banks could sting you, whether you were on a fixed or weariable rate, for exiting your mortgage before your thirty years are up, and they were astronomical fees, and so they've gone.

Now there are fees for applying for a home loan.

There are fees for discharging a home loan, but they're relatively small at about three hundred and fifty dollars for those discharge fees, different to exit fees.

There's some state government fees for you know, switching.

Lenders as well and things like that.

But you know, all in all, we estimate that someone that's switching their mortgage is paying what about one to one and a half thousand dollars in fees, some of which are negotiable.

So there's not those big exit fee penalties on variable rates.

But if you sign up to a fixed rate and you said to the bank, yes, I'm going to pay a fixed rate of five percent for the next two years, and you break that contract early and the bank is out of pocket because you broke that contract, they are entitled to charge you what they're out of pocket costs.

Okay, and they can I see.

And sometimes yeah, sometimes these are negotiable and sometimes I've can depend on where your next step is.

So if you say to your bank, I really just want to move to a more competitive fixed rate, they might wait the feats.

If you say, I want to stick with you, but I want to go to variable, but I'm going to stay with you, guys, maybe they'll negotiate those fees.

It's always worth having that conversation.

And obviously the worst one is if you see I can't do it anymore and I'm leaving you entirely, then obviously why wouldn't they impose their charges that they can legally?

Okay, So million dollar question, if I talked to you this time next year, what do you think the fixed ratio will be.

Do you think if we have no more cuts, and if we find clear stabilization and if the cycle is clearly over, do you think we'll see a lift in the number of people fixing or at least considering it.

I do think we'll see a lift in the number of people fixing, but I don't think it'll be a significant one.

I'm not going back to the days of where we were close to half of the people.

Opting for a fixed rate.

I think some of those people that tried out fixing, perhaps for the firs time, in that period of record low rates, really liked the certainty that it brought.

I certainly know that from talking to you know, friends who've you know, always interested in working out you know, what's happening with fixed rates because they want to fix again because they liked that certainty.

So I do think that perhaps that period of low rates has encouraged people and opens people's minds to that certainty where I think fixing gets problematic and where you know, we won't see these shots.

Why we won't see this sharp space spike, brother is because the break fees problematic.

But also fixed rates tend to be a lot.

Less flexible, so you typically can't get an offset account with them.

You typically have caps on how much extra you can pay in that fixed rate term, and again that turns some people off.

Although you know, some people do then have a foot in both camps, opt for a split loan, you know, take a gamble each way, but also get the flexibility that a variable rate can bring on that portion of their homeland, take advantage of an offset account whatever they want, and then have that security from the fixed rates.

So it's about.

Working out what suits your finances but also your personality, because there's some people that hate, absolutely hate the idea of locking in a rate and then seeing variable rates fullfill further that's just yes, horrifying to them, whereas other people absolutely hate worrying about THERBA like day in and day out, although it's only eight meetings a year now, so it's helpful.

And those people who will be horrified to have not taken a fixed rate and watched the variables climb.

And the thing about the split chorus, folks, is that you've got two sets of numbers, you've got two sets of fees.

I've done it, I've done all the variations.

Actually, what advisors say for what it's worth, and I'm always talking to advisers and talk to some of the best advisors in the country.

What they do tend to see is don't gamble, don't fix to best against the bank, because you probably never win.

But if you're a fixer, fix consistently, so for instance, you have a home mortgage and you had it for twenty years and you had four sets of five year fixes, you'll find that it smooths out really nicely over that period of time.

And what your advantage falls back largely to what Sally is saying, which is you actually can do your numbers and you can be sure of what your numbers are.

I think that is actually the ultimate comfort.

Whether you win or lose against the bank.

You know, you may win for a passage of play, a passage of time, and you might lose for another part.

But really it's about the security of it.

That's really good Sally, and very interesting terrific I think for us, I haven't seen many people talk about this.

It's about time we did.

All right, we'll be back in a moment.

Hello, Welcome back to The Australian's Money Puzzle podcast.

James Kirby here with Sally Tindle of Canstar, regular guests on the show.

Terrific guest to give us a picture of where it's all going in terms of the market.

Both your money in the bank, which is just to recap if I get any of this wrong, Tanby Sally, you're talking fours is a good way to get now with with deposits and term deposits, et cetera, and three is sort of working average across the banks.

And we'll put all that, We'll put all the tricks and caps and everything else to one side for the moment.

That's really interesting in clearly lovely yes.

And on the borrowing side, no one is fixing.

No one is fixing all right.

Of course it's not fixing because the rates have been dropping.

But if you fix, what if you fix now?

What if you fixed at these levels at four percent, say, and then it floated back up to eight or nine.

Well, I've seen it all happen.

Let me tell you.

I've seen it all happen.

I've seen people fixing the I remember people fixing at thirteen percent, Sally because they were worried it was going to go higher.

So you see to that panic fixing.

Panic fixing, Yeah, that's right.

The driver is you know what your neighbor's doing, and sometimes it's because your neighbor's panicking and you feel like you should panic too.

And I think that's the key with so many things relating to finance is just because what your neighbor do doesn't automatically make it a perfect idea for you.

You've got to understand what suits your finances.

It's so important.

But also don't make any decision in a rush.

Sometimes these things come with limited time specials things like that nothing should be rushed if you need to talk through it with a mortgage broker or a financial advisor, your accountant, your neighbor, your family friend, take that time to work it out and work out what suits your finances.

And what I did want to say before is you know, if you are thinking about fixing, there is a world of difference between say the Big four bank fix rates lowest fix rates and then the lowest on the market.

We've got the lowest on the market on our database at the moment at four point six four percent four point six four percent, whereas Westpac leading the way for the big banks at four eight nine percent for two years at this point in time.

But most of the other fix rates on offer from the big four banks are sitting there with a five in front of it rather than a four.

So you know, if you are going to fix, go find yourself Gooddale.

Yes, okay, and be strategic and not panic.

All right, Very interesting, A quick couple of quick questions.

I just wanted to try and cover them if I could, John j o N.

John James.

A recent episode you brought up the question asked you whether there was a level of employer mandated super at which someone should be allowed to choose to have this paid via their way as opposed to having it forced into super.

This was me talking about the sg guarantee now being at twelve percent and being high I think across the board.

Anyway, John points out that there is a thing called the maximum super Contribution base and it tends to be most applicable to higher owners, whereby the standard sg C, you know, the twelve percent applied against your income would result in breaching the concession and contribution cap which is currently thirty k, and thereby in occurring higher taxes.

Yeah, that's there.

That's very true, John, Thank you for pointing that out.

I mean, you don't have to nobody has to be penalized for paying their SGC.

There is that opt out if you like, the maximum super contribution base, which many people would be hitting at this stage when it's twelve percent and it's only thirty grand max contribution.

Well, you don't have to do your numbers for long to see how many people would be caught there.

Thank you very much, John.

I can't cover the rest of your expansive note, but that was very useful.

Okay, Adam says, I was alarmed to hear you describe our treasure as shrewd.

Battery finally reluctantly and begrudgingly succumbed to common sense on the superannuation meddling, sorry, the super reforms he has been peddling.

Okay, well this is from Adam.

I said he was politically shrewd, and I'll stand by that because that was a daft policy.

He shouldn't have gone ahead with it, and he hasn't.

That is the unrealized gains.

Just a comment about that annuation backflip that Jim Thomas did.

I just thought it was more like a half twist rather than twist.

We'll say not half, did I miss well, kept half of it twisted on the other half.

Yeah, Oh no, I know what you're saying.

It'd be interesting to say if it gets through.

I mean, cut to the chase, the tax on super earnings on super amounts above three million have suddenly doubled from fifteen percent to thirty.

So there you go, as you say, half twist.

Yeah, maybe he's half successful, maybe he's half shrewd.

All right.

The other point, then, that Adam really wants to make is about Melbourne, where we have people on the show saying it is the bargain basement in the national market.

Right now, we've had several people saying it.

We've had very few people undermining that concept.

Adam says, the idea someone would want to invest money in the economy down there is alarming.

I keep hearing how cheap it is a great time to buy, and can't help but see a correlation to Jim Charmers blind refusal to see what everybody else can see.

The Victorian government debt is now growing at two million an hour.

I honestly think the issues are terrifying, and I can't help think that so many people must put their head the sand down there.

And he mentions other things like crime et cetera, and lawlessness.

Okay, well, deep breath, it's the second biggest city and the prices are clearly the lowest in the land of all the metropolitan capitals.

They're trailing behind.

And if you even had to return to anything like remotely like historical averages, I think there would be investors would do very well.

And investors are I know anecdotally.

I haven't got the stats for you, but I talk to advisors all the time and they are bringing investors into Melbourne across.

So yes, the issue of the death et cetera is is, I think is a big issue.

I don't know so much about the crime, whether that's a big issue living in city.

I look, it hasn't affected me in any fashion or way.

What do you think, Sally about Melbourne has a bargain basement.

You pass those prices, right.

It's hard to go past the prices.

Yeah, it's right when you look at the cost of buying just a simple unit in Sydney and Brisbane these days, you know, even Adelaid's going gangbusters.

In many ways, Melbourne is looking increasingly attractive.

I think there's a lot of nerves though, and I think that's coming through in that email of you know.

The government is in debt.

The government has made some decisions that can impact people like investors.

They're worried probably that there's more to come in those decision making and there, and that probably has contributed to some of the you know cooling in prices there.

But people need places to live, and they need places to live in employment hubs where there's good transport and you know, there's you know, opportunities for education, and so I do think that you know, Melbourne will I think probably pick up pace as you know, as the months and years unfold.

I think it might take a little bit of time though.

Isn't it very interesting?

And thank you very much for that stimulating peace of correspondence, Adam, Thank you very much.

Okay, keep them rolling the money puzzle at the Australian dot com dot au for any questions, comments, observations, complaints.

They're all welcome, and so was Sally.

Thank you very much, Sally.

Great to have you on the show again.

Always terrific to talk to you.

Thanks and talk to you soon.