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Lenders have continued to slash their fixed home loan rates, despite the Reserve Bank’s decision to keep the official cash rate on hold at two per cent.
According to financial comparison website RateCity, one-year fixed rates have fallen to a record low of 3.30 per cent.
The group noted that longer-term fixed rates remain low too, with three-year fixed rates starting from 3.99 per cent.
RateCity financial analyst Peter Arnold said the low rates are a result of the increasing competition in the home loan space.
“First, the cost of funding has reduced, making it cheaper now for the banks to borrow money and second, there is an expectation of [a] further slowdown in the economy and a feeling that rates will drop lower still,” he said.
“With these factors combined, we’ve seen the lenders able to get more aggressive in their marketing and offering these sharper deals.”
However, Mr Arnold noted that some action is required for borrowers looking to make the most of these deals.
“We’re not seeing much in the way of cuts to normal variable rates, so borrowers can’t just sit there and expect their repayments to come down. If [borrowers] want a hot deal, [they’ll] need to take some action to get it,” he said.
“My tip is if your home loan rate starts with a four, then get out and find a better rate – 3.99 per cent is a sharp rate and gives consumers a great amount of certainty over a long period of time and there are plenty of shorter-term fixed rates and variable rates below that.
“What borrowers need to also understand is that you don’t have to fix 100 per cent of your home loan – you can have a foot in both camps with a split home loan.”
[Related: RBA decision ‘made sense’, says Flavell]
