Despite the Reserve Bank's decision to leave the cash rate unchanged at 2% yesterday, an analysis by a major home loan comparison website says lenders have continued to cut their fixed home loan rates out of cycle.
According to RateCity, fixed rates have fallen to a new record low of 3.30% fixed for one year. Longer-term fixed rates remain low too, with 3-year fixed rates starting at 3.99%.
Peter Arnold, financial analyst at RateCity, says there is a lot of competition in the home loan space, particularly among the shorter-term fixed home loans, and there are two main reasons for this.
“First, the cost of funding has reduced making it cheaper now for the banks to borrow money and, second, there is an expectation of further slowdown in the economy and a feeling that rates will drop lower still,” he said.
“With these factors combined, we've seen the lenders able to get more aggressive in their marketing and offering these sharper deals.”
Moving from the current average standard variable rate of 4.83% to a 1 year fixed rate of 3.30% shaves 1.53 percentage points off the rate and $265 off the monthly repayment on a $300,000 home loan. While switching to the lowest 3-year fixed rate of 3.99% would cut monthly repayments by $148. However, to be eligible for most of the best deals, some action is required by the borrowers and many existing customers may not benefit, Arnold said.