Over the last couple of weeks, many of Australia's lenders have slashed the interest on their fixed rate mortgages, with some cutting up to 70 basis points from their five-year fixed rate home loans.
Last week, the Commonwealth Bank of Australia, National Australia Bank and Westpac threw down the gauntlet to Australia's other lenders, after all three sliced the interest on their fixed rate home loan products.
The Commonwealth Bank of Australia was the first to move, slashing its five-year fixed rate to 4.99 per cent - a new low for the lender.
Within hours, National Australia Bank and Westpac matched CBA's five-year fixed rate pricing and NAB even trimmed the interest on its three- and four-year fixed rate home loans.
So what's behind this recent spate of rate cuts?
Firstly, it seems concerns about slowing global growth are driving down the cost of borrowing to record lows, allowing Australia's lenders to offer some of their lowest ever fixed rate home loans.
Secondly, Australia's lenders have made it very clear of late that they are hungry for business.
The Australian property market is going from strength to strength at the moment and Australia's lenders are keen to maximise on this positive momentum.
According to research conducted by RP Data, property values are up 10.1 per cent over the 12 months to July, while data from the Australian Bureau of Statistics shows home loan approvals are currently hovering around four year highs.
Australia's lenders can see that demand for home loans and property is soaring and as such, they are slashing the interest on their home loan products in a bid to win customers.
What this means for You
But just because fixed rate home loans are currently hovering around record lows, is fixing the best decision for you and your financial future?
Before you decide whether to fix your mortgage, it pays to do your due diligence and weigh up the pros and cons associated with having a fixed rate versus a variable rate mortgage.
Fixing your mortgage has some useful advantages, namely you have certainty around your monthly repayments and you are protected from future rate hikes (for the duration of the fixed rate term).
On the downside, if you decide to prematurely bail out of a fixed rate you could face “break costs”.
Because of this, it's vital for you to weigh the pluses against the potential downsides to determine if fixing is right for you.
A mortgage broker can help you to make the right decision for your needs – both now and into the future.