Fixed rates are the lowest they’ve been in Australian history. They are well and truly below variable rates for home loans with some being in the low 2’s.

Posted in: Insights

08/09/2020

Why are fixed rates so low?

Whilst the Reserve Bank of Australia (RBA) has cut variable rates by a total of 0.5% earlier in March this year (where most lenders chose to pass on around 0.25% in total), fixed rates have dropped by as much as 0.8%. 

This is because the Australian government gave the Banks access to funding on a three year fixed term at 0.25% where each Bank was allowed to access up to 2% of their outstanding credit facilities at this cheap rate. This meant the Banks significantly reduced the cost of funds for fixed rate loans compared to rate loans. The flow on effect meant that borrowers are now seeing rates as low as 2.19%. And there’s great news for people considering fixing as this month the RBA has announced that they are making the Term Funding Facility available, on the same terms and at the same 0.25% rate for an extended period until the end of June 2021.

Will rates rise again anytime soon?

The official RBA cash rate currently sits at 0.25% which is the lowest in Australian history. The RBA could possibly do one more rate cut, however, most economists think it’s highly unlikely.

Since the RBA is anticipating significant job losses, until such time that full employment picks up again and there is confidence inflation with be sustainable within the 2-3 per cent target range, rates will remain low.

Do I consider fixing?

Firstly, this depends completely on your individual circumstances and is entirely up to you. First and foremost, fixing provides certainty in repayments which gives you peace of mind knowing it won’t change for the (fixed) period, however, there are risks, restrictions and potential fees you may incur (early break costs) which you need to fully understand before you make your decision.

Choosing to fix your loan should be a decision made because you’ve assessed the repayments and want certainty, rather than because you think you can outsmart the market. 

Check out our lowest fixed rates here.

We highly recommend you have a chat with you Mortgage Broker to look at your options. They can explain the pro’s and con’s of fixing so you can make a well informed decision. Even if you have no plans to fix, why not take the opportunity to compare your current interest rate with the all-time-low rates now available, to see if you can save. 

 

 

*The information provided in this article is general in nature and does not take into account your personal circumstances. Since everyone's personal situation is different, this article should not be taken as advice. We recommend you seek individual advice with a mortgage broker.