Fixed rate demand has surged over 300% on the back of the Reserve Bank's decision to trim the official cash rate to 2% last week.
Visits to comparison site, Mozo's fixed rate loan pages increased 350% over the last week alone compared to the previous month, Property Observer reports.
With the recent rate cut of 0.25%, variable rates have dropped to as low as 3.98% but fixed rates are down to 3.95%, with fixed rates lower than three out of the five best variable rates listed by Mozo.
“With fixed rate loans closing the gap on variable rates, the appeal of locking-in your loan for 3 years or more has grown considerably since Tuesday,” Mozo director Kirsty Lamont told Property Observer.
“With interest rates likely to stay on hold in the coming months, now could really be the time to fix and reap the savings.”
Mozo data shows monthly repayments on the lowest 3 year fixed rate of 3.95% would be $1,575, while for the lowest variable rate loan (3.98%) it’s $1,582 per month, based on a $300,000, 80% LVR loan over 25 years.
“With funding costs low, there is really no reason why lenders shouldn’t be passing on the full 25 basis point discount,” said Lamont.
However, Lamont said it’s important that lenders pass on discounts to existing customers as well as new.
“Some lenders are holding off announcing the discount for existing customers, so check whether your lender is cutting rates and when you’ll be seeing lower repayments.”
