Banks continue to cut fixed rates to below 3%

However, possibility of further RBA cuts has consumers less interested in locking in rates

Banks continue to cut fixed rates to below 3%


By Madison Utley

Westpac-owned St George, Bank of Melbourne and BankSA have announced cuts ranging between 0.10% and 1.40%, bringing a number of their fixed interest rates below 3%.

“The new fixed rates are highly competitive, even leading the market in 4 and 5-year terms,” said Canstar group executive of financial services, Steve Mickenbecker.

“These offers look likely to open up the next round of competition,” he added.

The largest cuts were evidenced with the 4- and 5-year fixed rate loans, with BankSA cutting a notable 1.40% off these terms.

Both standard and package fixed rates saw reductions, with the package rates for owner occupiers paying P&I reducing to 2.99% for 60% to 80% LVR, and 2.94% for up to 60% LVR.

“The fall in bond rates has reduced longer term funding costs for lenders, and the Westpac subsidiaries have been able to pass this on to borrowers,” explained Mickenbecker.

While the reduced rates are available only for new loans at St George and Bank of Melbourne, they are also available for refinancing at Bank SA.

Despite the continued decreases evidenced across lenders of all sizes, demand for fixed rate loans is “the lowest we’ve seen all year,” according to Mortgage Choice CEO Susan Mitchell.

“Last year, a low fixed rate would have been under 4% p.a., but today we are seeing rates starting with a 2, which is certainly the lowest fixed rates we have seen in recent history.”

However, Mitchell understands why borrowers are willing to pass over such compellingly low rates, referencing the minutes from the RBA Board’s August meeting.  

“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,” she said.

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