Mozo money experts have urged Aussies to consider fixing their home loan rate, following the Reserve Bank of Australia’s emergency cash rate cut.
In response to the recent economic downturn as a result of the Coronavirus pandemic, the RBA made the decision today to cut the official cash rate by 25 basis points. At just 0.25%, the cash rate is now the lowest it has been in 23 years.
Mozo Director Kirsty Lamont said, “With many of us tightening our purse strings, today’s emergency rate cut could be the signal to fix your home loan, as many lenders may soon be faced with higher funding costs they will need to pass on to customers.”
This comes just days after Mozo research revealed that 87% of Australians fear trying economic times ahead and that 1 in 5 are anxious about their job security.
“Although record low rates are generally a good thing for mortgage customers, the level of risk faced by lenders in this volatile market means locking in a rate could be a smart move.”
Lamont suggested that in these difficult times, fixing your home loan interest rate could help ease any anxiety you might have concerning future variable interest rate hikes.
Within minutes of the RBA’s announcement to cut the cash rate, big four bank Commbank announced that it would be cutting rates for it’s 1, 2 and 3 year Fixed Rate (Wealth Package) Home Loan by a significant 70 basis points. This means that 2 year fixed rates will drop to a low 2.29% p.a. (comparison rate 4.19%*). This new low rate will not come into effect until May 1st, but when it does it will most likely be the lowest fixed rate home loan in the Mozo database^.
Depending on what other home loan lenders make cuts, this low rate will be closely followed by the following fixed rates offered by ING, BankVic and Well Home Loans:
- 2.49% p.a. for 3 year fixed rate loans (3.71% p.a. comparison rate*)
- Must be combined with ING Orange Advantage Home Loan
- No annual service fee (annual service fee $299 for Orange Advantage Home Loan)
- No application fee
- 2.50% p.a. for 3 year fixed rate loans (3.76% p.a. comparison rate*)
- $375 annual service fee
- No application fee
- 2.63% p.a. for 3 year fixed rate loans (3.54% p.a. comparison rate*)
- No annual service fee
- $250 application fee
Despite Commbank’s decision today to make cuts to its fixed interest rate home loans, Mozo’s research found that on average, fixed rates offered by the big four are still 0.54% higher than the most competitive rate on the market for 3 year terms.
So while fixing your rate may protect you from future rate rises, it is still a good idea to shop around for the most competitive rates.
Lamont also warned Aussies to watch out for hefty variable reversion rates once the fixed loan period is up. Mozo’s research found reversion rates as high as 5.60% p.a., that’s 3.16% p.a. above the most competitive variable rate in the Mozo database!
Feeling inspired to search for a fixed rate home loan? Why not take a look at the deals on offer below or compare rates on our compare fixed rate home loans page.
^Correct as of 19th March, 2020.
Compare fixed rate home loans - last updated January 16, 2021
^See information about the Mozo Experts Choice Home Loans Awards
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