ING cuts fixed rates: who's offering the cheapest fixed rate home loans right now?

Australian lender ING has trimmed its fixed rate loans ahead of next week’s central bank cash rate decision.

The online-only bank cut rates for owner-occupier home loans with a loan-to-value ratio (LVR) less than or equal to 80% by one-fifth of a percentage point (0.20%) for one- and two-year fixed rate mortgages and by a quarter percentage point (0.25%) for three-, four- and five-year fixed rate mortgages.

ING Orange Advantage fixed-rate home loans for owner occupiers (LVR <80%)

Source: RateCity data, accurate as of 30/03/2023.

More than 10 Australian lenders have cut fixed interest rates over the past 10 days, ahead of the Reserve Bank of Australia’s (RBA) Board meeting on Tuesday April 4 to determine the official cash rate.

Lowest owner-occupier fixed-rate home loans (LVR <80%)

Source: RateCity data, accurate as of 30/03/2023.

The RBA Board has been adamant that its decision to raise the cash rate at every opportunity over the past year has been to quell the scourge of rising inflation. Now that inflation has peaked and consecutive monthly figures indicate a notable deceleration, could this compel the Board to leave the cash rate untouched during its meeting next week?

Two of the Big Four banks have forecast another 25 basis points hike to the cash rate in April. However, CBA and Westpac suggest that the RBA may pause next month before hiking again in May.

Big Four banks' cash rate forecasts:

• CBA: 3.85% by May 2023, then dropping to 2.85% by December 2023
• Westpac: 3.85% by May 2023, then dropping to 2.35% by December 2025
• NAB: 4.10% by May 2023, then dropping to 3.10% by May 2024
• ANZ: 4.10% by May 2023, then dropping to 3.85% by November 2024

Note: These bank forecasts are subject to change. Figures are accurate at the time of publishing.

While these fixed rate reductions might seem appealing now, particularly in light of the expectation that the Board will again raise rates next month, it’s possible rates may be pared back by the end of the year or early in 2024.

Given that the full impact of ten consecutive cash rate hikes has yet to be felt by borrowers, the impending mortgage cliff is looming for more than 800,000 households, and the plausibility of a possible recession continues to swell, it’s reasonable to speculate that there may be cuts to the cash rate before the close of 2023.

The Commonwealth Bank of Australia (CBA) predicts that the RBA will deliver a series of rate cuts during the fourth quarter of this year and through the first half of next year, as a means of avoiding a sharp downturn.

Therefore, if you were to lock in these new fixed rates on multi-year terms you may end up paying a higher interest rate down the track than those offered to homebuyers if the RBA trims rates and banks pass on these abatements.

Earlier this week, ANZ raised the rate on its basic mortgage by up to 0.21% for new customers. The bank also increased the deposit size required to qualify for its lowest variable rate. The move comes on the back of a similar change by CBA last week, while NAB elevated its new customer rate for basic home loans at the start of the month.

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