Advertisement

It's a (fixed rate) war out there

Even before the Reserve Bank of Australia (RBA) cut the official cash rate to an historic low of just 1.50%, Australian financial institutions were been engaged in a fixed rate home loan war.

So far in 2016 we have seen two cuts to Australia’s official cash rate (in May and August). Nevertheless it seems that financial institutions have been doing their best all to attract new customers with highly competitive fixed rate home loan terms. And the strategy seems to be paying off. Of the many thousands of people using CANSTAR’s home loan comparison tables in August and Septemeber, for example, only 39 percent of searches have been for a variable rate loan. In terms of fixed rate home loans it seems that borrowers are prepared to lock their funds away for longer, with 5 year fixed rate terms the single most popular length, followed by 3 year terms.

 

Compare Home Loans

 

How have home loan rates changed?

There are some interesting findings when we look at residential home loans for an amount of $300,000 and compare the average advertised interest rates on CANSTAR’s database as at mid-September 2015 with mid-September 2016.

Over the past 12 months we have seen two cuts in the official cash rate, in May and August respectively this year, of 25 basis points. When it comes to variable loans for owner occupiers, that cut has not been been passed on in full, on average. 

Variable Home loan Rates
2015 2016 Reduction
Basic Variable 4.57% 4.29% 0.28%
Standard Variable 4.79% 4.46% 0.33%
Package Variable 4.53% 4.28% 0.25%
Source: canstar.com.au. Based on products listed on CANSTAR database. Assumes $300,000 loan, average interst rate on CANSTAR database for owner-occupiers, as at 19/9/15 and 19/9/16. Please note these are advertised rates – please check the relevant comparison rate of any specific loan products. Comparison rates are based on loan amount of $150,000. Read the Comparison Rate Warning.

The cut has also not been passed on in full on fixed-rate home loans, but as fixed rate loans are priced in anticipation of future economic conditions, this is not altogether surprising.  

Fixed Home loan Rates
2015 2016 Reduction
2 year fixed home loan 4.41% 4.05% 0.37%
3 year fixed home loan 4.47% 4.08% 0.39%
5 year fixed home loan 4.79% 4.54% 0.25%
Source: canstar.com.au. Based on products listed on CANSTAR database. Assumes $300,000 loan, average interst rate on CANSTAR database for owner-occupiers, as at 19/9/15 and 19/9/16. Please note these are advertised rates – please check the relevant comparison rate of any specific loan products. Comparison rates are based on loan amount of $150,000. Read the Comparison Rate Warning.

 

Should you fix your home loan?

So should home owners fix? Not necessarily in order to save money; judging by the past twenty years? history home owners have only managed to get it “right” half the time. It would appear to be a 50/50 bet.

Try out our Home Loan Repayments Calculator to see for yourself how much you could potentially save on your home loan.

Great home loan rates across all terms

Assuming a loan amount of $300,000, on the CANSTAR database there are currently:

111 variable rate home loans with an advertised interest rate of less than 4%

83 1-year fixed home loans with an advertised interest rate of less than 4%

147 2-year fixed rate home loans with an advertised interest rate of less than 4%

44 3-year fixed rate home loans with an advertised interest rate of less than 4%

17 5-year fixed  rate home loans with an advertised interest rate of less than 4%

Data correct at 21/9/16. Check current rates here.

Please note these are advertised rates – please check the relevant comparison rate of any specific loan products. Comparison rates are based on loan amount of $150,000. Read the Comparison Rate Warning.

Compare Home Loans
Similar Topics:

Share this article