Australian Banks Slash Fixed Mortgage Rates

Several large Australian lenders lowered the fixed interest rates on their home loan offerings in a sign of expected variable rate cuts in the months ahead, the Australian reported on 7 February.

Westpac has cut the fixed rate on its two-year premier advantage mortgages by 0.4 percentage points to 4.99%. After the reduction, the rate has come to the lowest two-year fixed rate offered by the bank since April 2009, it said.

Westpac unit St George has axed the fixed rates for customers of its advantage package to between 5.15% and 5.69%, with the cut spanning its one, three, four and five-year fixed rates.

Clients of CUA will also see reduced fixed mortgage rates. The financial institution has just rolled out a new home loan product with a three-year fixed rate of 5.3%.

The variable home loan rates that are currently being offered by the four biggest banks range from 6.38% to 6.51%.

The move by major banks indicates that they expect the Reserve Bank of Australia (RBA) to further slash rates this year. But even with the help of the central bank’s additional rate cuts, the fixed rate products are currently priced at a level that floating rates may need several months to reach, Paul Smith, a spokesman for home loan broker Loan Market, commented.

The cost of funds for banks is easing, as it has been stressed over the past couple of weeks, but it is still unclear whether they will make material cuts in the variable rates, he added.

Earlier in February, the RBA kept the official rate flat at 3%.

Rob Kelly - Managing Director

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