Have rate reductions made it time to ‘fix and forget’ your home loan?

By Tom Watson ·

A month on from the Reserve Bank of Australia’s (RBA) March Emergency rate cut and the dust has well and truly settled, revealing a substantial shift in the fixed rate home loans market. 

According to a new Mozo analysis, the average fixed rates on offer for owner-occupiers across one to five year terms are now considerably lower than the average variable rate home loan in the Mozo database, which currently sits at 3.45%. 

Here’s the current lie of the land:

  • 1-year fixed term average: 2.82%
  • 2-year fixed term average: 2.73%
  • 3-year fixed term average: 2.80%
  • 4-year fixed term average: 3.12%
  • 5-year fixed term average: 3.16%

While there was little movement among lenders on the fixed rate front following the first March 3 RBA cut, a considerable number of lenders quickly moved to reduce fixed rates following the emergency RBA cut on March 19. 

“After the second rate cut in March, 66% of one-year fixed home loan rates changed, compared to 20% after the first rate cut. This market movement was similar across two, three, four and five year fixed home loans and reduced the fixed home loan average,” said Mozo Director, Kirsty Lamont. 

“With so many fixed home loans offering low interest rates, we might see a shift in Australia from a majority variable rate market to a predominantly fixed rate market. Many countries around the world have a majority fixed rate market, like the United States where it’s common to have a 30 year fixed rate.”

As a result of the heavy rate reductions in the last month, some fixed rate offers in the Mozo database are now edging close to the 2.00% mark. 

Among the lowest, online lenders Reduce Home Loans (2.64% comparison rate*) and Well Home Loans (2.41% comparison rate*) both have three-year fixed offers of just 2.09%, while ING’s three year Fixed Rate Loan offer is just 2.14% (3.62% comparison rate*). 

Australia’s Big Four banks have also joined the fixed rate cut party, with offers as low as 2.34% (4.18% comparison*) with the ANZ 2-year Fixed Rate offer and 2.39% (4.10% comparison rate*) for the NAB 3-year Tailored Home Loan (Fixed) offer. 

“Right now there are great deals available for borrowers who are happy to lock in a rate. The full economic impact of COVID-19 is still unknown causing uncertainty and fear, fixed interest rates are a great way to lock in a payment plan for your home loan,” said Lamont. 

“When looking for a fixed rate home loan it’s important to consider the automatic revert rate, so you aren’t forced to refinance at the end of your term. The average revert rate for fixed home loans is 3.62% but some lenders have lower revert rates.”

RELATED: Compare & switch in self-isolation with these 3 refinance home loans

Like the sound of fixing your rate? Get comparing by checking out some of the hottest offers around in the table below, or make your way over to Mozo’s fixed rate home loans comparison hub to view even more deals.

Compare fixed home loans - page last updated October 27, 2020

Search promoted home loans below or do a full Mozo database search. Advertiser disclosure.

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  • 2.29% p.a.
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    2.09% p.a.
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    2.98% p.a.

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  • 1.98% p.a.
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    2.41% p.a.

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    2.14% p.a.
    fixed 1 year

    2.48% p.a.

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  • Hot Deal$2,000 Refinance Cash Bonus (T&Cs apply)

    2.29% p.a.
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Tom Watson
Tom Watson
Finance journalist

Tom Watson is a financial journalist at Mozo, specialising in fintech, property and business banking. Whether it’s reporting on banking trends or uncovering the latest product innovations, Tom’s mission is to keep our readers up to date with breaking Australian financial news. His work is often sourced in the media and across social media channels. Tom has a degree in Journalism from the University of Technology, Sydney.