New data has revealed an ongoing industry-wide reduction in fixed home loan rates.
Canstar’s weekly rate summary showed 168 decreases and zero increases in fixed home loans, as well as 16 decreases and 32 increases in variable rates.
“This is not just one segment of the market. This is not just the little guy desperate to retain a bit of business, this is happening across the whole market,” said Canstar group executive of financial services Steve Mickenbecker.
The average rate for an owner occupier paying P&I on a 3-year fixed loan decreased from 4.03% to 4.01%, from 4.40% to 4.37% for 4-year fixed, and from 4.44% to 4.40% for 5-year.
Mickenbecker explained, “In months past, lenders had to cover rising funding costs somehow and the easy way to do it was to impose an increase on existing borrowers and have special rates for new business. That’s the game they’ve been playing.
“Now the borrowing costs for the banks has been reduced so lenders are able to pass that on, give away a bit of margin to make sure they have something in the marketplace that’s still competitive.”
As larger banks such as NAB and Adelaide Bank decrease rates, smaller lenders will have no choice but to follow suit.
“If you’re reliant on the broking market to draw loans, as a lot of the smaller lenders are, then you’re almost in a position where you’ve got no choice. You have got to stay competitive or the broker will place the loan with someone who is,” said Mickenbecker.
From big banks to alternative lenders, he expects the reduction of longer-term fixed rates to continue into the following months.