Fixed Rate Curiosity Rises While Rates Fall

The Reserve Bank of Australia (RBA) rate cut in May and the subsequent interest rate drops by lenders has caused a spike in interest for fixed interest rates, says leading mortgage broker Loan Market.

Loan Market spokesperson Paul Smith said that since the RBA rate cut, 40 per cent of home owners enquires have been looking into fixing their interest rate, which is the highest proportion since the start of 2013.

“There’s been a roller coaster of speculation when we’ll hit the bottom of the interest rate cycle and the latest RBA rate cut has caused lenders to drop their fixed rates even further as they expect the cash rate to drop again,” Mr Smith said.

Mr Smith said that one of the interesting areas of movement in the past two weeks has been lenders moving the pricing of their 3 year fixed rates more than their 2 year rates.

“As lenders speculate where variable rates will bottom out, they’re going to find ways to attract and retain customers – fixed rate products are so competitive right now for this reason,” he said.

Mr Smith said that it was important for a borrower to consider the longer term implications of signing up for a fixed or variable rate and not to make a decision based on the interest rate alone.

“Fixed rates continue to be priced below variable rates and have been so for nearly 12 months now. It’s a trend that’s against the historical comparison of fixed and variable rates, which further adds to the unique situation interest rates are presently in.”

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Paul Smith

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