St George and Bank of Melbourne cut fixed rates as trend for fixed-rate cuts slows

The major banks may have a hard time getting across the message that they are facing increased funding cost pressures after both St George and Bank of Melbourne cut their fixed-rate mortgage rates.

NSW-based St George and Victoria-based Bank of Melbourne, both subsidiaries of Westpac, cut their fixed rates by between 14 and 19 basis points effective immediately. 

One-year fixed-rate loans reduce from 6.33% to 6.14%, two-year fixed-rate loans reduce from 6.14% to 5.99% and three-year fixed rates have come down from 6.24% to 6.09% for both banks. 

The cheaper rates are available for limited time for new customers and existing customers switching into a new fixed-rate mortgage. 

Rob Chapman, chief executive of St George Bank, says the latest fixed-rate cut is seventh reduction since July. 

The cycle of fixed-rate cuts, which peaked in October bef0re the November and December rate cuts is forecast to ease as interest rate sentiment shifts towards further rate cuts in 2012.

Damian Smith, CEO of comparison website RateCity.com.au, says the relative attractiveness of fixed rates is decreasing, with variable rates falling faster than fixed rates over the past two months.

“There has been some small movement in some fixed rates, but no 30- or 40-basis-point cuts,” he says.

“Over the course of a cycle, consumers are generally better off with a variable rate loan, but there are windows of opportunity for taking out a fixed-rate loan.

“The last window was between August and November, following fixed rates falling very hard over the previous six months.

“That window is now closed.”

 

 

 

 

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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