When will interest rates fall? It’s the question everyone is asking right now, and while speculation swirls about future rate cuts, the latest moves in fixed rates suggest we may not have to wait too much longer for variable interest rates to head south.
While about 4-in-5 Australian households are currently on a variable-rate mortgage, fixed-rate home loans shouldn’t be overlooked.
Locking into a fixed rate can offer several advantages, including certainty of repayments – which may make budgeting easier – as well as protection from possible rate hikes during the fixed term.
Right now, the direction of fixed rates is attracting plenty of attention.
Many lenders are cutting their fixed rates
A growing number of lenders, including several major banks, are starting to cut fixed rates across all terms, according to Mozo’s latest banking round-up.
Macquarie Bank, Commonwealth Bank, HSBC, Bank of Queensland, Westpac and its stable of brands – St.George, BankSA and Bank of Melbourne – have all recently cut some of their fixed rates.
They were joined by smaller lenders such as Hume Bank, MOVE Bank and Great Southern Bank, which also dialled down their fixed rates.
What’s especially exciting is that a number of these rate cuts were surprisingly large, in some cases worth half a percent or more for 2- to 3-year fixed rate terms.
Why are fixed rates falling?
Home loan interest rates – both variable and fixed – are shaped by a variety of factors.
When it comes to fixed rates, a key driver can be lenders’ forecasts of where they believe interest rates are headed.
In this way, fixed rates can be a bellwether for the direction of future interest rates.
Among the major banks, Commonwealth Bank expects a 0.25% RBA rate cut in late 2024.
ANZ is anticipating the RBA to cut rates from about February next year.
NAB has pencilled in a rate cut by mid-2025, and Westpac is expecting several rate cuts starting in March 2025.
The good news is that none of the big four banks seem to be anticipating rate hikes any time soon, and that’s great for those with a home loan.
What could this mean for you?
The trend to lower fixed rates suggests variable rate cuts may not be too far away either.
Right now though, fixed rates can be lower than variable rates depending on your choice of lender, fixed term and the size of your deposit.
If you’re currently struggling with your home loan repayments, locking in a fixed rate for the next 1, 2 or 3 years might help give you some certainty and home loan repayment relief.
But you’ve got to weigh that up against the potential of any variable rate cuts that you could miss out on in that same time period.
Bear in mind, predictions of rate cuts are exactly that – forecasts, not guarantees of lower rates.
Another option to consider is splitting your home loan between fixed and variable rates, which can allow you to get the best of both worlds: the certainty of a fixed rate plus the savings of a variable rate if interest rates start to head south.
Call us today to understand if fixing or splitting your loan rate could help you save.
Ollie Hooper – Mortgage Broker (Stax Home Loans) m: 0401 032 868
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