Fixed rates tumble as lenders anticipate RBA cut

Three lenders cut 13 owner occupier and investor variable rates by an average of 0.07%, while eight lenders cut 159 fixed rates by an average of 0.2%, Canstar reported. 

“No hikes – just cuts in a week where fixed rates continued to fall as lenders factored in the likelihood of a cash rate cut by the RBA on 20 May,” said Sally Tindall (pictured), Canstar’s insights director. 

The average variable interest rate for owner-occupiers paying principal and interest now stands at 6.51%, while the lowest variable rate for any loan-to-value ratio (LVR) is 5.59%, offered by Pacific Mortgage Group. 

The number of rates listed below 5.75% on Canstar’s database has jumped to 646, up from 508 the week prior. 

Check out the list of lenders offering rates below 5.75%: 

To compare with the previous week’s rate changes, click here. 

Macquarie Bank leads fixed rate cuts 

Fixed home loans saw the biggest movement last week, with major changes led by Macquarie Bank. 

“A total of eight lenders cut 159 fixed rates last week with Macquarie Bank leading the charge, taking its lowest two- and three-year fixed rates down to a market-leading 5.19%.” 

For borrowers meeting specific green home standards, even lower rates are available. 

“The only bank offering a lower fixed rate is Bank Australia with a three-year fixed rate at 4.94%, however, customers will need to stump up an all electric, solar-panelled new build with a NatHERS rating of 7.5 stars or more in order to qualify for this rate,” Tindall said. 

Variable rates hold steady for now 

Variable home loan rates remained relatively unchanged during the week. 

“On the variable front, there were no notable moves, with most lenders likely to continue to tread water until the outcome of the next RBA meeting,” Tindall said. 

Lenders appear to be waiting for further economic signals before adjusting variable pricing. 

March quarter CPI to influence RBA decision 

The upcoming March quarter inflation figures are seen as critical to the Reserve Bank’s next move. 

“Looking ahead, the March quarter CPI figures, due this Wednesday, will be critical in determining the RBA’s next move with many economists expecting trimmed mean inflation to land inside the central bank’s 2%-–3% target band for the first time since the December quarter of 2021,” Tindall said. 

Westpac Group Chief Economist Luci Ellis said RBA is almost certain to cut the official cash rate to 3.85% in May, regardless of how the upcoming March quarter CPI figures print. 

Ellis noted that although the RBA had previously been highly data-dependent, global uncertainty and softer domestic indicators have now shifted the risk outlook sharply to the downside. 

“The turmoil abroad has, however, changed the game and flipped the risks,” she said. “You can lock in a 25bp cut in May, even if the Q1 inflation data are a shade disappointing.” 

All big four banks tip rate cut in May 

All major banks are forecasting a cash rate cut when the RBA meets on May 20. However, a larger-than-expected reduction appears unlikely. 

“All big four banks are forecasting a cash rate cut on May 20 with NAB expecting a double cut down to a cash rate of 3.6%,” Tindall said. “However, with the Trump trade talks now looking more negotiable and the RBA re-confirming it won’t be jumping at shadows, a double cut seems highly unlikely.”