Fixed interest rates are emerging as the major player after their average dropped lower than variable rates recently.
The average variable interest rate in Australia is currently 3.45 per cent, while the average fixed rates are below:
1-year – 2.82%
2-year – 2.73%
3-year – 2.80%
4-year – 3.12%
5-year – 3.16%
Mozo director Kirsty Lamont spoke to Broker News about fixed rates taking front and centre over variable.
“With so many fixed home loans offering low interest rates, we might see a shift in Australia from a majority variable rate market to a predominantly fixed rate market,” she said.
“Many countries around the world have a majority fixed rate market, like the United States where it’s common to have a 30-year fixed rate.”
“With the Reserve Bank stating it will not lower the cash rate below the current 0.25 per cent, it would be safe to assume that interest rates are as low as they can go.”
Around two-thirds of lenders on the Mozo website reduced their 1-year fixed home loan rate after the RBA’s emergency rate cut in mid-March but not everyone was able to.
“Most lenders have struggled to pass on all the rate cuts made over the last year, so now could be a great time to fix your home loan and guarantee you’ll get the same low rate for a couple of years,” Ms Lamont told Broker News.
“Normally after a rate cut, these smaller lenders broadcast their ability to immediately pass on the rate cut to their customers, but there has been silence after the emergency March cut.”
“Big banks seem to have deeper pockets and more agility across their loan books in these unprecedented times which has seen them cut their fixed home loan rates.”