Number of providers with sub-5% fixes hits highest level since 2022
Twelve additional lenders began offering fixed interest rates under 5% for one- and two-year terms in August, according to analysis by financial comparison site Mozo.
This brings the total number of providers with such offers to 29, the highest seen since October 2022, signalling renewed competition among lenders and presents fresh options for borrowers seeking competitive home loan rates.
Mozo’s database does not list any variable rates below 5% as of Monday.
The Reserve Bank of Australia (RBA) is continuing its rate-cutting cycle, but further substantial reductions in fixed rates appear unlikely, according to Peter Marshall (pictured right), banking expert at Mozo.
“Some analysts believe that there might only be one or two more cuts from the RBA in the current cycle,” Marshall said. “Cuts to fixed rates during August were fewer and smaller than we’ve seen for the previous few months. If the outlook for the economy stays the same, we may not see fixed rates fall much further than they are now.”
Deciding whether to choose a fixed or variable rate home loan remains complex, Mozo said. Borrowers are advised to weigh several considerations, including whether available rates are lower than their current rate, the competitiveness of fixed rates if variable rates decline, and the importance of predictable repayments versus the flexibility of variable rates.
The availability of features such as offset accounts – often absent from fixed rate loans – and the option to split the loan between fixed and variable portions are also relevant factors.
Borrowers should also assess the potential risks and benefits of fixing their rate during a period when further cash rate reductions may occur. For instance, a two-year fixed rate of 5% per annum compared with a variable rate of 5.25% per annum could become less attractive if a 25 basis point cut brings the variable rate down to 5% per annum.
Conversely, if the variable rate remains unchanged, a borrower could save $1,752 over two years on a $500,000 loan with principal and interest repayments over 25 years.
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