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Fixed mortgage rates continue to fall fast in May

Posted: 21 May 2019 2:29 pm
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It's a fixed rate feeding frenzy and a sign that home loan rates could get even lower.

Over the last two weeks, at least seven lenders have slashed their fixed rate mortgages, often by 20 basis points or more. Fixed rate loans, usually higher than variable, are now some of the most competitive on the market.

Who's cutting rates and why?

Most experts are now predicting that the RBA will cut the cash rate soon. This typically means lenders will lower their variable mortgage rates. Home loan funding costs have also fallen sharply in recent months, making it cheaper for lenders to get money to fund a mortgage.

Great Southern Bank, Greater Bank, ME Bank, Aussie, UBank, Adelaide Bank and loans.com.au have all cut rates.

Fixed loanOld rateNew rate
Great Southern Bank Fixed Rate Home Loan - 1 Year Fixed (Owner Occupier, P&I)3.84% p.a.4.84% p.a.
Great Southern Bank Premium Fixed Rate Home Loan - 3 Year Fixed Rate (Owner Occupier, P&I)3.99% p.a.3.5% p.a.
Aussie Select Basic Fixed Rate Home Loan - 5 Year Fixed LVR up to 80% (Owner Occupier, P&I)4.29% p.a.5.89% p.a.
Aussie Select Standard Fixed - 3 Year (Owner Occupier, P&I)3.96% p.a.
ME Flexible Home Loan Fixed with Members Package - 3 Year Fixed Rate (Owner Occupier, P&I)3.79% p.a.4.99% p.a.
ME Flexible Home Loan Fixed - 3 Year Fixed Rate LVR >80% &<=90% (Owner Occupier, P&I)3.94% p.a.5.49% p.a.
Greater Bank Ultimate Home Loan - Discounted 2 Year Fixed LVR ≤90% ($150K+ Owner Occupier)3.69% p.a.4.09% p.a.
Greater Bank Great Rate Home Loan - 3 Year Fixed (Owner Occupier)3.94% p.a.5.49% p.a.
Adelaide Bank SmartFix Home Loan - 5 Year Fixed Rate (Owner Occupier, P&I)4.29% p.a.5.04% p.a.
Adelaide Bank SmartSaver Fixed - 3 Year (Owner Occupier, P&I)3.79% p.a.4.84% p.a.
loans.com.au Package Special - 2 Year Fixed (Owner Occupier, P&I)3.79% p.a.2.29% p.a.
loans.com.au Package Special - 3 Year Fixed (Owner Occupier, P&I)3.89% p.a.3.19% p.a.

Can we expect more rate cuts soon?

If the RBA does cut the cash rate, then variable rates will fall. And given how close fixed and variable rates are to each other right now, you'd have to expect variable rates to go even lower into the 3.3-something territory or perhaps lower.

Variable rates offer greater flexibility but less certainty than fixed loans and are more popular with borrowers. At present, fixed loans represent only 21% of the market.

Lower interest rates are good news for borrowers. It makes money cheaper to borrow, reducing your mortgage repayments. Take the loans.com.au Package Special - 3 Year Fixed (Owner Occupier, P&I), which had a 41 basis point rate cut. If you'd borrowed $500,000 over 30 years, your repayments would like quite different:

  • Monthly repayments at 3.89%: $2,356
  • Monthly repayments at 3.48%: $2,240

That's a difference of $116 a month or $1,392 a year.

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