Want a mortgage rate starting with a 1? Consider fixing
After the last RBA cut, the lowest fixed rate loans are on average 25 basis points lower than the lowest variable rates.
When the Reserve Bank cut the cash rate again in November, something very unusual happened. Lenders started cutting their fixed rate loans but not their variable rate loans.
The Big Four Banks, moving almost in lockstep, cut some of their fixed rates down to below 2%. Surprisingly, most of their lowest rate offers are now 4-year fixed rates. This is unusual because longer fixed rate terms tend to come with higher rates than 1 or 2-year terms.
Many smaller lenders moved in a similar direction. This means that fixed rate loans, which were already slightly lower than variable rate loans, are now easily the market's most competitive offers.
To see the difference, we've compared the 10 lowest fixed rates on the market with the 10 lowest variable rates. If you take the average of these 10 fixed rates and compare it to the average of the 10 variable rates, you get the following:
- Fixed rate: 1.90%
- Variable rate: 2.15%
That's a 25 basis point difference. Now those are both very competitive rates. But if you had a $400,000 home loan over 30 years, your monthly repayments would look very different if you switched from one to the other:
- 1.90% = $1,458 per month
- 2.15% = $1,508 per month
That's a $50 a month saving, or $600 a year.
Here are the rates so you can calculate the loan repayments for yourself:
The 10 lowest fixed rates
| Fixed loan | Interest rate | Comparison rate |
|---|---|---|
| Greater Bank Ultimate Home Loan - 1 Year Fixed (Owner Occupier) | 1.89 | 3.74 |
| RACQ Bank Choices Package Fixed Loan - 1 Year $150k+ (Owner Occupier) | 1.89 | 4.17 |
| Tic:Toc Live in Loan Fixed Rate Home Loan - 2 Year (Owner Occupier, P&I) With offset | 1.89 | 2.29 |
| Sydney Mutual Bank First Home Buyer Fixed Rate Home Loan - 2 Year Fixed (Special) | 1.89 | 2.82 |
| Suncorp Home Package Plus Fixed - 2 Year Fixed Rate Special Offer $150k+ LVR ≤80% (Owner Occupier, P&I) | 1.89 | 2.94 |
| Australian Mutual Bank First Home Buyers Standard Variable - 2 Year Fixed (Owner Occupier) | 1.89 | 2.82 |
| Reduce Home Loans Rate Crusher 1 Year Fixed Rate (Owner Occupier) | 1.90 | 2.42 |
| Well Home Loans Balanced Fixed Home Loan - 1 Year (Owner Occupier, P&I) | 1.94 | 2.18 |
| UBank UHomeLoan - 3 Year Fixed Rate (Owner Occupier, P&I) | 1.95 | 2.36 |
| Firefighters Mutual Bank Fixed Home Loan - 4 Year Fixed (Owner Occupier) | 1.95 | 3.61 |
These rates are correct at the time of publication.
The 10 lowest variable rates
| Variable loan | Interest rate | Comparison rate |
|---|---|---|
| Reduce Home Loans Super Saver Variable | 1.99 | 2.05 |
| loans.com.au Smart Booster Discount Variable Home Loan - 1 year | 1.99 | 2.47 |
| Pacific Mortgage Group Standard Variable Home Loan - LVR 80% (Owner Occupier, P&I) | 2.09 | 2.09 |
| Homestar Star Essentials Home Loan - $250K to $850K LVR up to 80% (Owner Occupier, P&I) | 2.14 | 2.17 |
| Well Home Loans Balanced Variable - LVR 80% Special Offer (Owner Occupier, P&I) | 2.17 | 2.20 |
| Freedom Lend Variable Home Loan - LVR ≤ 80% (Owner Occupier, P&I) | 2.19 | 2.19 |
| Tic:Toc Live in 10% deposit Variable Rate - Principal & Interest | 2.19 | 2.20 |
| homeloans.com.au Low Rate Home Loan with Offset - LVR 60% to 80% (Owner Occupier, P&I) | 2.24 | 2.26 |
| Hume Bank Flexi Low Rate Home Loan - (Owner Occupier, P&I) | 2.29 | 2.29 |
| Westpac Flexi First Option Home Loan - Basic Variable Rate (Owner Occupier, P&I) | 2.29 | 2.72 |
These rates are correct at the time of publication.
We've included 1 to 5-year fixed rates, and all the loans for both types have an 80% LVR or higher (meaning you need a 20% deposit). There are a few even cheaper rates than the ones listed here, but with a 60% LVR, they aren't an option for most borrowers.
Is now the time to fix?
Both fixed and variable rate loans are very competitive at the moment. And it looks like they will remain low for some time. In a statement accompanying the November cash rate decision, RBA governor Philip Lowe said: "The Board is not expecting to increase the cash rate for at least three years."
So there's no rush to fix, but at the same time, you can get a very good deal.
But there's more to a home loan than just a low rate. Many borrowers prefer variable rates because they offer more flexibility and are easier to refinance.
Need more home loan help? Compare fixed and variable home loan rates, learn more about the pros and cons of going for fixed or variable, or chat to a mortgage broker for professional, personal guidance.
