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ISCOVER
Staff Reporter
The Reserve Bank’s decision to leave the cash rate on hold in February could enhance the popularity of fixed rates.
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According to new data from Loan Market Group, most of the major lenders slashed up to 40 basis points from certain fixed rate products following the RBA’s decision on Tuesday.
Loan Market corporate spokesperson Paul Smith said the latest shift in fixed interest rates indicated lenders were all anticipating further rate cuts this year and gives many home owners and home buyers elevated consideration for locking in their interest rates.
“We haven’t seen fixed rate this low in several years and the spread between them and variable remains in the unique position where variable are nearly a full per cent higher,” Mr Smith said.
Mr Smith said that although the RBA cash rate is at 3 per cent, the chances of it falling more than a full percentage point in the year next were slim, considering the RBA’s conservative response to the soft areas of the economy over the past year.
“For those looking at fixed rates right now, there’s an opportunity to hedge your bets and lock in an interest rate that could be lower than variable rates over the term of the loan,” he said.
“Fixed rate products are currently priced at a level that variable rates may not reach for several months; even with the help of RBA rate cuts. It’s been highlighted over the past few weeks that the cost of funds for lenders are easing, but whether or not they significantly trim variable rates remains to be seen.”
