Need a fix while working from home? Do it to your mortgage!
Thursday 26 March 2020
Following the outbreak of the novel coronavirus, and the Reserve Bank of Australia’s (RBA) emergency cash rate cut, now may be the time to think about locking in a fixed home loan rate.
In response to the rapid spread and emerging financial effects of COVID-19, the RBA made the extraordinary decision to cut its official cash rate twice this month, dropping it to an historic low of 0.25%. (The first time they’ve cut rates ‘out of cycle’ since 1997).
Recent Mozo research also showed that 87% of Aussies are fearful of how the times ahead will impact them financially.
“The Coronavirus pandemic has and will hit many Aussie homes economically, and Mozo’s latest research proves that the majority of us are worried about what’s to come,” Mozo Director, Kirsty Lamont said.
“Since the RBA’s emergency rate cut last week, lenders have been slashing fixed interest rates - so in this unstable financial environment, locking in a low fixed home loan rate could be a smart move for mortgage customers.”
So what difference has the RBA cut made to fixed home loan rates?
After the first cut on 3 March 2020, 19 home loan lenders in the Mozo database dropped their fixed rate offerings.
Then, after the second emergency rate cut on 19 March 2020, 18 providers slashed rates, some of which were the same providers who responded to the first cut, making it the second time for them this month.
And notably, all four of the big banks: ANZ, CommBank, NAB and Westpac, made changes to fixed home loans after the most recent rate cut.
“While it’s true that variable rates are at an all time low, due to the turbulence of the current market, Aussie lenders could soon see higher funding costs which will then affect their customers,” Lamont said.
“So locking in a fixed rate now, may help alleviate the stress if variable rates were to hike back up.”
According to the Mozo database, the lowest fixed rate is offered by ING - at 2.09% on its 2 year fixed term and 2.14% on its 3 year fixed term, while the lowest variable rate sits at 2.44%.
It’s important to remember, however, reversion rates on fixed home loans tend to be significantly higher than the fixed rate and some standard variable rates.
Want to check out some fixed home loan options? Check out the table below or jump over to our fixed home loan comparison tool for even more providers.