Lenders cutting fixed rates to sub three per cent as demand wanes

Lenders cutting fixed rates to sub three per cent as demand wanes
Lenders cutting fixed rates to sub three per cent as demand wanes

Property buyers are leaning towards variable rate home loans, given the recent interest rate cuts and proposed further cuts from the RBA.

New data from Mortgage Choice shows demand for fixed rate home loans fell in July.

Only 14 per cent of all home loans written were for fixed rate loans.

Mortgage Choice chief executive officer Susan Mitchell said demand for fixed rate loans is the lowest they've seen all year.

"Despite some very attractive fixed-rate home loan pricing, borrowers across the country are reluctant to fix.
“Last year, a low fixed rate would have been under 4% p.a., but today we are seeing rates starting with a two, which is certainly the lowest fixed rates we have seen in recent history. 

The state by state breakdown of fixed and variable mortgage. To enlarge, click here.

Lenders cutting fixed rates to sub three per cent as demand wanes
Source: Mortgage Choice

“It’s not entirely surprising that borrowers are choosing to keep their options open by opting for variable rate home loans. The reality is, the opportunity to save on repayments if the Reserve Bank cuts the cash rate is too good to pass up.

The RBA suggested at its August meeting, as they have done for a number of months, that they would consider a further easing if necessary to support sustainable growth in the economy.

Reacting to a dwindling in fixed home loan mortgages are the St George, Bank of Melbourne and BankSA, who have slashed their fixed rates by up to 1.40 per cent.

St George and Bank of Melbourne are offering up to five year fixed rates as low as 2.94 per cent, for customers with a deposit of 40 per cent or more, and 2.99 per cent for customers with a deposit of 20 per cent or more.

The two are now offering the lowest four and five year fixed rates, according to RateCity.com.au data.

A total of 75 lenders have cut fixed rates since the most recent RBA cut on 2 July 2019, the biggest being a cut of 1.60 per cent.

RateCity research director Sally Tindall said the banks were gearing up for long-term low rates.

“The banks are falling over each other to claim the title of having the lowest fixed rate on the market,” she said.

“Fixed rates as low as 2.94 per cent will prompt some customers to review their own rate and potentially switch lenders.

“It’s unusual to see some of the largest banks offering some of the lowest fixed rates in the country.

“The idea of fixing your rate under three per cent until August 2024 is a foreign concept to a lot of Australian mortgage holders. While these low fixed rates may seem like sensational deals, we’re likely to see more cuts. 

“The latest ABS data shows the percentage of people opting to fix has fallen to just 14.1 per cent, which suggests customers are holding out to see how low rates go,” she said.

Joel Robinson

Joel Robinson

Joel Robinson is a property journalist based in Sydney. Joel has been writing about the residential real estate market for the last five years, specializing in market trends and the economics and finance behind buying and selling real estate.

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