July 27, 2014
4.99 per cent on a five-year home loan is very sharp. Interest rate advisers all agree conditions are ideal for a switch to fixed rates. “Historically, cash rates have been around 5 per cent and interest rates another 2 per cent higher. So we are now near the bottom of the cycle.” AMP Capital’s chief economist Shane Oliver, agreed, saying economic indicators showed borrowers needed to take advantage of the low rates. Dr Oliver predicted a rate rise was likely to be about nine months away, around the June quarter next year.“ The banks are offering this deal because they can. Costs of borrowing have dropped and are consistent with Australian bond yields falling.” A combination of economic factors including improvements in the global capital market with lower spreads have resulted in the cheaper cost of money.“ Last year some mortgage providers were already doing 5 per cent. So to avoid losing market share, the big banks have joined in,” Dr Oliver said. He cautioned the low rate deals may not last because banks would have only a limited amount of money at low rates. “
Could this be the start of what will be more pressure on fixed rates. Other lenders will match if not undercut the rates.