With the huge government debt in the U.S. & Europe, frightened investors are moving their money from the stock market to the safe haven of bonds.
This has driven down the 5 year bond rate to 1.56%, would you lock your money in a 5 year investment for this low return ???
The plus side , this has driven fixed rates down to a ALL TIME LOW.
Once the bank buys these bonds, add on their profit margin of 1.5% - 1.75%, we have a 5 year fixed rate of 3.39%.
Now, it becomes a difficult choice, shall we go fixed or variable?
Investors are looking at buying real estate has a safe place to park their money.