Many families have refinanced their home loans to lock in better interest rates after the RBA began increasing its cash rate target.
Competition is heating up in the home loan market with 32 lenders, including major banks ANZ and NAB, slashing interest rates in April, with more to come as the RBA changes tack.
National Australia Bank became the latest to join the crowd cutting fixed rates for new owner occupied borrowers by up to 0.5 per cent and going even further for new investment borrowers with a fall of up to 0.6 per cent.
Canstar Group executive financial services, Steve Mickenbecker, said cuts to fixed rates signalled that the market expected lower variable rates ahead – though not so certain was the timing of that.
“The move by NAB and the 32 other lenders on Canstar’s database to cut owner occupied fixed rates this month suggests variable rate cuts are in the future but gives no guidance on Tuesday’s Reserve Bank decision.”
Borrowers are still reeling from the record pace of rate hikes by the RBA in the past year. Picture: NCA NewsWire / Nikki Short
MORE: ‘We’re past the worst for housing prices’: ANZ Bank
Inside the Brisbane house that’s become Australia’s hottest home
“The banks reduce fixed home loan rates when their cost of longer-term funding goes down, and that has started to happen following the decline in Australian government bond yields. NAB’s cut to its three year home loan fixed rate neatly aligns with the fall in the three bond yield.”
“A more accurate guide to variable home loan rates is the bank bill swap rate and is also closely aligned with the Reserve Bank cash rate. It has only moved down around 0.05 per cent since the start of March.”
Giving investors a bigger cut “may be the start of a winding back of the 0.25 per cent premium investors have been paying since APRA applied the brakes years ago”, Mr Mickenbecker said.
RateCity.com.au research director, Sally Tindall, said “fixed rates are edging their way south, but still remain on the nose with most borrowers”.
“While the majority of banks’ lowest rates are still variable, in the case of NAB and ANZ, their lowest rates are now fixed. The catch is, if you want these fixed rates, you have to be willing to lock up your loan for the next three years, a proposition many customers aren’t keen on committing to at this point.
RateCity Research Director Sally Tindall. Picture: Tim Hunter.
“The cash rate is now at or near the peak, and while Governor Lowe has said it is too early to talk about rate cuts, that’s exactly what many economists are predicting within the next couple of years.”
She said while those rate cuts by RBA may not materialise, it was enough to convince many borrowers to stick with variable for the time being.
“Australians are hesitant fixers at the best of times. At the height of Covid, when the sharpest fixed rates were well under 2 per cent, more than half of all new loans still opted for variable. Today, the idea of fixing is a much harder pill to swallow. Locking in a rate in the mid 5’s doesn’t quite have the same appeal.”
She expected banks to continue to slash fixed rates over the next couple of months.
“One of the next cabs off the rank is likely to be Westpac. Its lowest 3-year fixed rate is almost a full percentage point higher than some of its big bank rivals.”
Steve Mickenbecker, group executive, financial services, at Canstar
The unpopularity of fixed rates at present was apparent in the latest ABS Lending Indicators where it made up just 5.4 per cent of new loans in February – a massive drop from 28.1 per cent at the same time last year.
“It can be hard to make the switch from a variable to a fixed rate offer when Commonwealth Bank is predicting variable rate relief as early as this year and ANZ, NAB and Westpac all expect variable rate cuts to come in 2024,” Mr Mickenbecker said.
“There is just enough data to suggest the Reserve Bank may continue to keep the cash rate on hold, but also enough data to put us all on notice that another touch or two on the brakes may be necessary at some stage.”
“Future timing of rate moves will determine whether a decision to fix now was a winner, but at least it forestalls any further increases that might be coming in the short-term.”
The Reserve Bank board meets Tuesday for its May monetary policy meeting.
Lenders that have cut fixed rates in April:
(Owner occupier, P & I, overall average cut)
Adelaide Bank -0.15%
AMO Group -0.30%
ANZ -0.60%
Athena -0.23%
Aussie -0.70%
Australian Mutual Bank -0.28%
Bank Australia -0.43%
Bank of us -0.30%
BOQ -0.40%
Commonwealth Bank -0.40%
Community First Bank -0.20%
Credit Union SA -1.27%
Easy Street Fin Services -0.20%
Firstmac -0.49%
Greater Bank -0.30%
IMB -0.08%
loans.com.au -0.52%
Macquarie Bank -0.15%
ME -0.47%
Mortgage House -0.22%
NAB -0.29%
Newcastle Permanent -0.38%
Orange Credit Union -0.31%
Pepper Money -0.42%
QANTAS -0.20%
Qudos Bank -0.22%
Queensland Country Bank -0.10%
Regional Australia Bank -0.15%
Resi -0.71%
Suncorp Bank -0.33%
The Mac -0.50%
TicToc Home Loans -0.22%
Yellow Brick Road -0.71%
(Source: www.canstar.com.au – 27/04/2023. Based on owner occupier fixed loans on Canstar’s database, available for any loan amount, any LVR and P & I repayments; excluding first homebuyer only and other special condition loans.)
FOLLOW SOPHIE FOSTER ON TWITTER
The post Rate cut: 32 lenders slash home loan interest ahead of RBA move appeared first on realestate.com.au.
Did you miss our previous article...
https://bulimbapropertymanagement.com.au/buyers-blitz-brisbane-auction-event-but-sellers-say-no/