Fixed rate home loans are currently hovering around record lows after the banks have slashed interest rates on their fixed rate mortgages.
The Commonwealth Bank moved first on 23rd July, 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 the Commonwealth Bank five-year rate. Over the last couple of weeks, many lenders have trimmed their rates on a range of fixed rate loans, from two year through to five year loans.
What is behind these cuts?
It appears that concerns about slowing global growth are driving down the cost of borrowing for lenders, allowing them to offer lower fixed rate home loans.
Also, the Reserve Bank has now left official interest rates on hold at 2.5 per cent for twelve consecutive months. The RBA reiterated that “the most prudent course is likely to be a period of stability in interest rates”. This situation has positively impacted the property market.
According to RP Data, dwelling values across the combined capital cities climbed 1.1 per cent over the last three months. Data from the Australian Bureau of Statistics shows home loan approvals are currently hovering around four year highs.
The banks have made it clear that they are hungry for new business. In a market with strong demand for property and home loans, they are passing on lower borrowing costs in order to win customers.
What this means for you
With so many good offers available on both fixed and variable rate home loans, there may be something out there that is better than your current home loan. There may even be a better rate on offer with your current lender.
Before you decide whether to fix your mortgage, it pays to consider the pros and cons. The main benefit these loans provide is certainty, however if you decide to bail out of the fixed rate, then you could face “break costs”.
If you are thinking about fixing your mortgage and would like to find out more, call Craig on 0411 782 440 for an obligation free chat. You can also share this blog so that other people can join the conversation.
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