And then more could follow
Banking, insurance, wealth could all go
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Pressure is mounting on two of Australia’s major banks to follow the herd and cut fixed rates to below 2%.
While National Australia Bank and Westpac both cut their two-year fixed home loan rates to below 2%, Commonwealth Bank and ANZ are still holdouts.
NAB cut its rate to 1.89% last week, down from 2.04%. That move came after Westpac cut its two-year fixed rate to 1.79%.
“Now all eyes are now on CBA and ANZ to see if they will jump on the bandwagon and bring their rates below 2%,” RateCity research director Sally Tindall told The Australian. “People looking for a two-year fixed rate with a big bank are going to find the rates from Westpac and NAB more attractive.”
Steve Mickenbecker, Canstar group executive of financial services, also said CBA and ANZ would face mounting pressure to slash rates.
“Commonwealth Bank’s lowest rate offer is currently 1.99% fixed for four years, a term that most borrowers find daunting,” Mickenbecker told The Australian.
Moving from the average variable rate of 3.28% to a two-year fixed rate of 1.89% could save $290 per month for an owner-occupier paying principal and interest on a $400,000 home, according to a Canstar analysis.
Read more: Rate war rages on as lender slashes fixed rate to new low
“The lure of unbelievably low fixed-rate loans with the added benefit of some providers offering cashback incentives to refinance will hopefully entice more Australian homeowners to switch and save,” Mickenbecker said. “Fixed rates below 2% provide borrowers with an option to lower their loan repayments, but it’s important to check if the loan offers the ability to make extra repayments and access an offset account or redraw facility to help you get ahead. Splitting a loan into part variable and part fixed rate is a way borrowers are cleverly getting all that they want and need in their loan.”
Just two years ago, two-year fixed rates at the big four banks averaged 3.76%, according to The Australian. The average owner-occupier taking out one of those loans today would pay $382 less per month during the fixed term, according to a RateCity analysis.
“It’s no wonder people are willing to bid more at auction now than they were two years ago, when the cost of taking on debt is today so much lower,” Tindall said.
- Westpac cuts mortgage rates even lower
- NAB slashes home loan rates