CASH RATE ON HOLD: But fixed rates keep tumbling

The RBA has left cash rate on hold today at an historic low of 1 per cent.

Reserve Bank Governor Philip Lowe has indicated there will be a prolonged period of low rates and further cuts are still on the table.

While the cash rate has remained steady since July, more than 30 lenders have cut fixed rates, suggesting they are pricing in at least one more rate cut.

Right now, the average 3-year fixed rate for owner-occupiers paying principal and interest on RateCity.com.au is 3.51 per cent. A year ago today, it was 4.10 per cent. That’s a difference of 59 basis points.

Source: RateCity.com.au Average rate for owner-occupiers paying principal and interest.

RateCity.com.au research director Sally Tindall said: “There are now over 30 lenders offering fixed home loans below 3 per cent, with more set to follow as the expectations of another cut ramp up.”

“A lot of home owners that fixed their rate at 4 or 5 per cent will now probably feel like they’re missing out, even though it could have been a cracking deal at the time.

“Fixed rates are a contract, and if you break it, you’re likely to be liable for any loss that your bank incurs. Often, this fee can run into the thousands.

“That said, if you are unhappy with your rate, it never hurts to give your bank a call and see what can be done.

“At worst they’ll tell you what your break fees will be, and you can consider your options. At best, there’s a chance, albeit slim, that your bank will cut you some slack, especially if they want to keep you on their books,” she said.

If you have a fixed home loan – can you get out of it?

• Find out break costs: Ask your bank to calculate how much they’ll charge you for exiting your fixed loan early.
• Compare home loans: Find the best home loan on offer that meets your needs.
• Do the maths: How long will it take you to break even if you paid the break fee and switched home loans.
• Make a decision: Decide if it’s worth your while to break your fixed loan and switch home loans.

Things to consider before committing to a fixed rate mortgage

• How do fixed rates compare to variable rates? Make sure you’re happy paying the rate you sign up to, even if rates fall further.
• What’s your plan for the property? If you sell or refinance within the fixed loan term you could be liable for break fees.
• Do you want to make substantial extra repayments or have the flexibility of an offset? Fixed rates typically are far less flexible than variable rate loans so check the terms and conditions before signing.
• How many years do you want to fix your home loan for? Remember it’s a contract that you’ll be expected to keep for the whole term.
• What will you do when the fixed term is up? Check the revert rate, make a plan for what you might want to do when it ends and diarise the end date.

Some of the lowest home loan rates

Source: RateCity.com.au

Rates are for owner-occupiers paying principal and interest and many have conditions, including LVR requirements.

Mortgage House variable rate is not available to NSW customers.

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