Yeah, fixed rates are based on bond yields, which are currently at 2.875% for 5 year bonds. For those to drop 0.5-1 percentage points from here, traders would have to either think that the policy rate is going back down to emergency level rates in the near future, or that it's going to the ~2% range and will stay there for years.
Because a 5 year not only has to price in the current drop, but also a potential recovery afterwards where interest rates get raised. So even if they think rates are going down to 1.5-2% in this cycle, they have to allow for them potentially going back up to 3-4% in a few years, which means 2.5-3% (i.e. the current yield) is about the mid-point of that. And that yield translates into ~4% fixed rates.
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