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There can be no arguments around the fact that fixed rate home loans are pretty sharp at the moment
In fact, according to RateCity, more lenders slashed the interest on their fixed rate products throughout the month of August than during the last major rate changes in November.
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On average, four-year fixed rates were cut by 41 basis points, while three-year fixed rates were not far behind.
Three-year fixed rates are now as low as 6.39 per cent – 91 basis points below the average standard variable rate of 7.30 per cent.
So what does this all mean?
Some economists, including AMP’s Shane Oliver, believe the rapid and consistent trimming of fixed rates suggests the Reserve Bank may also give the official cash rate a haircut.
But not everyone agrees.
CBA’s outgoing chief executive, Ralph Norris, says inflation is likely to keep the official cash rate steady at 4.75 per cent for the foreseeable future.
“The underlying Australian economy is in pretty sound shape,” Mr Norris said.
“If the Reserve Bank is focused, and continues its focus - which is obviously the object of monetary policy on inflation - then it’s hard to see that there would be substantial cuts.”
ANZ chief executive Phil Chronican echoed Mr Norris’ comments and said cuts to fixed rate mortgages were being driven by a slowdown in home lending and cheaper wholesale funding.
Mr Chronican said circumstances have combined so that it is now cheaper for lenders to fund a two or three year mortgage than to fund a variable rate mortgage.
Regardless of whether the Reserve Bank of Australia does cut rates on the back of all these fixed rate reductions, one thing is clear: fixed rate home loans are very sharp at the moment.
And this in turn provides brokers with the perfect opportunity to engage their existing client database.
While the latest data from Mortgage Choice suggests fixed rates are not particularly popular with home buyers – the products currently account for less than 15 per cent of all new mortgages written – it is still a good time for brokers to reengage their clients, talk about the market and perhaps generate some new business opportunities.
Although brokers should not recommend fixing to their clients, it is perfectly reasonable to call and offer insights as to what is happening in the market at the moment and answer any questions your client might have about the state of the economy.
Be proactive and business opportunities may follow.
