Fixed rates are continuing to track below variable rates, even in the wake of the Reserve Bank’s official cash rate cut.
ING Direct has announced further cuts to its fixed rate product suite, bringing its three year rate to 6.19% and its one and two year rates to 6.09%. With fixed rates continuing to undercut variable rates, ING Direct head of broker distribution Mark Woolnough has told Australian BrokerNews rates could go even lower.
While Woolnough could not forecast ING Direct’s future fixed rate moves, saying any moves would ultimately be driven by economic data, he commented that fixed rates below 6% were not unlikely.
“We’re very close, and in terms of driving competition and driving activity in a slow credit growth environment, lenders are looking at how they can price attractively and sensibly, in the shorter term more so than in the longer term. Just from a customer psychology perspective, five-point-something – even if it’s 5.99%, compared to six-point-something is a very nice number,” he said.
Woolnough said the products continued to be popular, even following the Reserve Bank’s cash rate cut. Despite the Reserve Bank cut and ensuing variable rate reductions from lenders, Woolnough said borrowers still felt a degree of uncertainty about the outlook for rates.
“There’s a lot of talk out there about where rates will go, with people saying they’ll go down in three months or up in six months. It’s difficult for the customer to pick, and it comes to the point where they say they’re comfortable with a certain level,” he said.
Woolnough said “a good chunk” of the bank’s application volumes continue to come from fixed rate products. In addition to the cuts to its product suite, Woolnough touted the flexibility of the bank’s fixed rate loans, and said they allowed borrowers greater leeway than many other fixed rate products.
“One of the benefits of our fixed rates is the customer can make up to $10,000 a year in additional repayments. Our recent Financial Wellbeing Index showed that 43% of households pay extra on their mortgage, so this way they get the certainty of rate and the flexibility of being able to make additional repayments,” he said.