Fixed rate cut frenzy! Why most lenders don’t cut variable rates


This month, the Reserve Bank of Australia (RBA) made the extraordinary decision to cut its official cash rate twice – in response to the outbreak and the spread of COVID-19.

However, Australian home lenders reacted to the latest “emergency rate cut” a little differently than they usually would.

According to the Mozo database, the majority of lenders who have cut rates since the RBA’s last decision have dropped their fixed rate offers, while only a handful have cut variable rates.

Currently, the lowest 3-year fixed rate in our database is 2.09% (2.41% comparison rate *), which brings rates closer to the 2.00% mark.

Mozo banking expert Peter Marshall says this is to be expected in a very low interest rate environment as banks attempt to maintain net margins while offering interest to their depositing clients.

“The government has also made a pool of funds available to banks, fixed at a rate of 0.25% for up to three years – these factors have led many lenders to choose to reduce fixed rates,” he said. he declares.

“While we haven’t seen any fixed rates drop below 2.00% yet, I expect that to happen. And if it does, this would be a great time to consider fixing things up. all or part of a mortgage, because rates are unlikely to go lower than that.

Of the lenders who responded to the recent RBA rate change, ALL of the Big Four cut their fixed mortgage rates.

And currently, ANZ offers the lowest 2-year fixed rate of 2.19% (4.00% compare rate *) for homeowners with an LVR of 80%, compared to 2.29% offered by CommBank ( 3.87% match rate *), Westpac (3.45% match rate *) and NAB (3.91% match rate *).

“As fixed rates become cheaper than variable rates, it’s easy to understand the attractiveness that we’ll see more borrowers choosing to fix,” Marshall said.

“It’s always important to keep in mind that there may be a breakage fee if you have to cancel the loan early, although if the rates go up when you want to break, those fees will be minimal. ”

Also, keep in mind that home loan reversion rates are usually higher than the rates you’ve locked in, and in some cases higher than standard variable rates.

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Want to compare killer fixed mortgage rates? Take a look at the table below or go to our home loan comparison tool for even more options!

* CAUTION: This comparison rate only applies to the example (s) given. Different amounts and terms will result in different comparison rates. Costs such as redemption or prepayment charges, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is that of a guaranteed loan with monthly repayment of principal and interest of $ 150,000 over 25 years.

** The initial monthly repayment figures are only estimates, based on the advertised rate, loan amount and term entered. The rates, fees and charges and therefore the total cost of the loan can vary depending on the amount of your loan, the length of your loan and your credit history. Actual repayments will depend on your personal circumstances and changes in interest rates.

^ See information on the Mozo Experts Choice Home Loan Awards

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