Mortgage rates continued their gradual decline last week, with lenders trimming both fixed and variable home loan rates, according to Canstar’s latest data.
“Mortgage rates continued to edge south last week with four lenders trimming fixed rates, while two gave some of their variable rates a haircut,” said Sally Tindall (pictured), Canstar’s data insights director.
Markets are now laser-focused on the Reserve Bank (RBA) ahead of its Aug. 11-12 meeting, with brokers and market players widely expecting a 0.25% rate cut. Financial markets now price the move as a near-certainty after annual headline inflation fell to 2.1%, trimmed mean to 2.7%, and unemployment rose to 4.3%.
Two lenders cut seven owner-occupier and investor variable rates by an average of 0.15%, while four lenders reduced 92 fixed rates by an average of 0.26%.
“These rate cuts might be relatively small, but it continues along the now established trajectory for mortgage rates, which now have one foot in the ‘4s’ for both fixed rates and now variable,” Tindall said.
“Macquarie’s rate cuts took the bank’s lowest two-year fixed rate into the 4’s for owner-occupiers paying principal and interest, at 4.99%, while for investors, it dropped to 5.15% for the same two-year term.”
The Reserve Bank’s next monetary policy meeting is shaping up as a pivotal moment for borrowers, with markets broadly expecting a 0.25% cut to the cash rate.
“Next Tuesday’s RBA monetary policy decision is widely expected to deliver a 0.25 percentage point cut, which would take the cash rate to 3.6%, a level we last saw back in April 2023, which was in the thick of the hiking cycle,” Tindall said.
The June CPI data confirming core inflation within the 2-3% target band and a recent rise in unemployment are key drivers for the board’s decision.
“The main driver might be the June CPI figures, which confirmed that core inflation is in the target band for the second quarter in a row, however, the uptick in unemployment will also play on the board’s mind,” Tindall said.
“While the country has been on a rollercoaster ride over the last few years, our jobs figures have been relatively rock-solid – a fact the RBA is rightly proud of and one they will move to protect, particularly if we see more wobbles in the months ahead.”
For mortgage holders, a rate cut may be imminent, but the benefits will only arrive once banks pass it on.
“For borrowers, yes, it does mean a cash rate cut is highly likely – but don’t go banking on any extra cash until it lands in your bank account,” Tindall said.
She noted that while the RBA is expected to ease policy soon, its timing remains flexible.
“The RBA has shown it doesn’t dance to the beat of market expectations – it’s the one steering the ship. It has confirmed a rate cut is coming but the timetable is not set in stone,” Tindall said.
“Banks are also at the helm of your mortgage, and while we expect the big banks to step up to the plate and pass the next cut on in full, there’s no guarantee every lender will do this.”
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