From mid-March, fixed home loan rates have dropped to be lower than variable interest rates on average, possibly triggering a significant change in the Australian mortgage market.
“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,” said Mozo director Kirsty Lamont.
“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.”
While the average variable interest rate within Australia currently sits at 3.45%, the average fixed rates are as follows:
“With the Reserve Bank stating it will not lower the cash rate below the current rate of 0.25%, it would be safe to assume that interest rates are as low as they can go,” said Lamont.
“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.”
Well over half (66%) of the lenders listed on Mozo’s site reduced their one-year fixed home loan rates after the emergency RBA rate cut in March, with similar movements evidenced across longer terms as well.
However, not all segments of the lending market were able to execute the same reductions.
“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,” Lamont said.
“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.”
