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A spate of fixed rate cuts from major banks and other lenders are not yet tempting broker customers to act, but are already driving more conversations with brokers that could support more business.
ANZ this week announced a 0.25-percentage-point reduction in fixed rates for owner-occupiers and investors with deposits of 20% or more, following previous cuts of up to 0.7% earlier in October.
The market expectation is the RBA will begin cutting the cash rate from early next year, with NAB this week predicting rates would come down to 3.1% by late 2025 or early 2026.
FiNext principal and broker Joshua De Buelle (pictured above) said while he had not seen any of his customer base move to lock in any of the new fixed rate deals, they were proving to be a conversation starter.
“I think that, depending on how you look at it, it sparks a bit of positive news for home buyers,” De Buelle said.
“There is now that potential that rates might start to come down. For the last three years, all they have heard is that rates are going up, and now maybe they may be going the other way.
“People can now flirt with the idea rates are coming down. People are asking the question, ‘When do you think rates will drop?’, which they haven’t been asking much for the last three years.”
De Buelle said the fixed rate cuts provided finance brokers with a chance to engage client bases.
“We are posting about the headlines where clients can see them – it’s eye catching in social media marketing when customers are scrolling through and they see a 5.64% fixed rate.
“It’s a bit of click bait really that can just be a good conversation starter.”
The fixed rate could also support optimism among broking channel referrers and business partners, as the opportunity to talk to them about how the market is moving can also build their confidence.
For example, De Buelle said flagging fixed rate cuts with partners such as real estate agents could help “pep them up a bit” and get them feeling positive about the prospect of doing more business.
“I am optimistic for mortgage customers and property owners in the Perth market. Lower fixed rates or even eventually lower variable rates could give customers a bit of relief.”
De Buelle said if variable rates followed fixed rates in coming down, customers would be less worried and more likely to spend that extra money on renovations or shopping at the local store.
“That’s what the RBA does, control inflation and people’s spending. Hopefully they [mortgage holders] don’t go berserk and spend it all at once, but it does open the door to be a bit more relaxed with budgets, and takes a bit of the pressure off.”
Whether borrowers will look at fixed rate deals as rates come down depends on the borrower.
De Buelle said that, when explaining the choice casually to customers, he usually emphasised that fixed rates were an option for borrowers if they wanted certainty in their finance repayments.
“You always need to look at the customer’s risk appetite. If someone’s more of a risk taker, they may prefer a variable rate; they may try to ride the rate down as much as they can to try and get the lowest rate possible.”
De Buelle said that, with fixed rates usually priced higher than variable rates, the market had reached a “tipping point”, which offered borrowers a clearer signal of where rates could be headed.
“Clearly variable rates may be coming down, but customers don’t know when or by how much,” he said.
“Banks are quite clever and are not giving away money for free. They are trying to buy customer loyalty; they want to lock the customer in to prevent the customer leaving.”
He said it came down to the risk appetite of borrowers as to whether they wanted to lock in a fixed rate early, with a chance variable rates could end up dropping by more over the next year or so.
