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Smaller lenders can compete with the majors through their fixed rate price structure, Loan Market Group’s chief operating officer Dean Ruston has said.
According to Mr Rushton, there is currently a large discrepancy between standard variable and fixed rates.
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"The average fixed rate is now more than 2 per cent greater than the average standard variable rate," he said.
And while Mr Ruston believes borrowers have missed the boat on fixed rates, an opportunity exists for smaller lenders to lower their fixed rates and attract borrowers that want consistency in their home loan.
“Variable interest rates are climbing and more borrowers are wondering whether or not now is the time to fix their home loan,” Mr Rushton told The Adviser.
“While I believe the time to fix was early 2009, there is an opportunity for smaller lenders to snare market share from the big four by lowering their fixed rates to compete with the majors variable rates.”
Early last month, ING DIRECT dropped the interest rate on its two, three, four and five year fixed rate residential mortgage products, to be 7.24 per cent p.a, 7.59 per cent p.a, 7.84 per cent p.a, and 7.94 per cent p.a respectively.
The bank’s executive director of mortgages Lisa Claes said that even though fixed rate volumes are currently low across the industry, ING DIRECT expects to see an increase in fixed rate applications in the current rising variable rate environment.
Mr Rushton also said recent government initiatives have made more money available to smaller lenders, adding further pressure to pass on the reduced cost of borrowing.
“The increased funds available to lenders will also narrow the gap between fixed and variable rates, providing a better opportunity to fix,” he said.
“More competition between the banks along with greater confidence in the wholesale investor market may see some very attractive fixed rates coming through this year.”
