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Home Loan Fixed Rates Plummet

23 June 2016

Home loan customers are being offered unprecedented five-year fixed rate deals signalling rates will stay low for some time yet, experts say.

The Reserve Bank of Australia kept the cash rate at 1.75 per cent this month but that hasn’t stopped lenders from continuing to cut their mortgage rate deals.

Nearly 180 fixed loan rates have fallen this month while more than 100 variable loan rates have also decreased, new analysis by financial comparison website RateCity shows.

Smaller lenders including Greater Bank and Teachers Mutual Bank have both rolled out never to be seen before five-year fixed rate loan deals at 3.99 per cent.

And one of the nation’s largest mortgage brokers, Australian Finance Group’s general manager Mark Hewitt, said it signalled there could be room for rates to plummet even further.

“These (five-year) fixed rates indicate that banks think rates are going to be low for a good period of time,’’ he said.

“Someone taking out a five-year fixed rate is obviously very good for a bank as well because it means the customer won’t be going anywhere.”

AFG figures show fixed rates so far this quarter are 19 per cent of our total volume, up from 14.5 per cent for the same period last year.

RateCity spokeswoman Sally Tindall said these unprecedented record-low fixed rate deals will take borrowers through until 2021 on a stellar deal.

“About a year ago a rate under four per cent was a rarity, now we are seeing five-year fixed rates under four per cent which is something we’ve never seen before,’’ she says.

“A couple of the smaller lenders on the market are really fighting it out for the coveted spot of the lowest rate particularly with fixed rates.”

But RateCity analysis found during the past 20 years variable rate borrowers were better off 63 per cent of the time than those who fixed their rate.

HSBC chief economist Paul Bloxham expects the RBA board to cut the cash rate to 1.5 per cent in August if inflation figures remain low.

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