September home loan snapshot: A softer market doesn’t always mean a cheaper market

Last month, the Reserve Bank of Australia (RBA) increased the official cash rate again and economists predict that we’ll continue to see more hikes until early 2023.

The current cash rate is 1.85%, and several banks have applied the increase to their variable loans. As a result, Australia’s property market has gradually cooled down, meaning that properties aren’t selling as quickly as they did in 2021. To top that off, CoreLogic reported a 2.0% price drop in capital cities last month. The last time it dropped this rapidly was more than 40 years ago.

Sadly, most price drops have come at the market’s expensive end, meaning that most properties might still be advertised at a “full” price. 

With rising interest rates and expense price tags, home buyers–especially first time buyers–are less likely to get a home loan. CoreLogic data says home loan lending has decreased by 4.4%, and first home buyer lending went down by 10.0% in June.

It's important to remember that we are also seeing a drop in auction activity and this can work in a buyer’s favour. More specifically, buyer competition has reduced, which could be good for price negotiations.

So how are variable rates and fixed rates looking in this current market? Find out below.

Fixed home loans now average above a ‘4’

Ultra low fixed rates are a thing of the past. Once upon a time, several fixed rates started with a ‘1’, but now the lowest fixed rates in our database are a handful of rates starting with a ‘3’.

According to Mozo’s database, the average fixed rates for owner occupiers with an 80% LVR and a $400,000 loan are:

• 1-year - 4.98% p.a.
  
• 2-year - 5.49% p.a.
  
• 3-year - 5.78% p.a.
  
• 4-year - 6.01% p.a.
  
• 5-year - 6.25% p.a.

The graph below shows that fixed rates skyrocketed at the start of 2022. Several economists predict that this trend will continue well into next year.

Recent fixed and variable interest rate movements

We’ve seen increases across all the home loan products in our database. In fact, in the last month, there were 1770 increases in variable home loan products and 909 in fixed home loan products tracked in the Mozo database. Many of the variable home loan interest rate hikes were in line with the RBA’s new cash rate.

Here are some notable changes from the last month.

Variable home loans

• Nano increased rates by 65bp, now from 3.89% p.a. (3.89% p.a. comparison rate*). 
  
• Bank Australia lifted the rates on its Basic Home Loan by 25 to 39bp, now starting from 3.55% p.a. (3.59% p.a. comparison rate*). 
  
• Bank First’s Complete Home Loan rates are only up 13bp. Rates start from 3.59% p.a. (3.64% p.a. comparison rate*).

Fixed rate home loans

Surprisingly we saw some fixed rate cuts this month.

• Commbank cut its 4 year fixed rate by 160bp to 4.99% p.a. (5.77% p.a. comparison rate*).
  
• Westpac also cut its 4 year fixed rate by 100bp to 4.99% p.a. (5.40% p.a. comparison rate*).
  
• Macquarie cut all its fixed term rates by 75bps.

Lowest home loan rates

Even though the interest rate averages for home loans have gone up, there are still a few variable and fixed rates below a ‘3’ in the Mozo database. Below are the lowest variable and fixed mortgage rates (P&I, LVR <80%) among lenders we track.

Lowest variable rates — Mozo database (September 1, 2022)^^

Lowest and average fixed rates — Mozo database (September 1, 2022)^^

These are the lowest rates available in our database for borrowers with an <80% LVR. More competitive rates are available for borrowers with LVRs below 70% and 60%.

Are you thinking about a property or looking to refinance your existing mortgage? Use Mozo’s handy home loan comparison table to examine lenders side-by-side, or use our refinance calculator to see how much you could save.

^^Interest rates are based on an owner occupier making principal and interest repayments on a $400,000 loan with an 80% LVR. Check out our dedicated Australian home loan statistics page for more information on average mortgage rates.