Regional banks are getting increasingly competitive, but is there an appetite for fixed mortgages right now?
Customer-owned P&N Bank has upped the ante on fixed-rate mortgage wars with a one-year fix of just 4.65%.
At the time of writing, it was the cheapest fixed home loan on the market, tied with BCU Bank’s one-year fix, according to Canstar’s home loan comparison table.
For comparison, Commonwalth Bank's one-year fixed rate is currently 5.64%.
The mortgage wars have heated up since the Reserve Bank of Australia (RBA) slashed rates for the third time this year in August.
Now at 3.6%, the cash rate is at its lowest level in 29 months, prompting lenders to gain as competitive an edge as possible amid heightened mortgage market competition.
Earlier this month, Suncorp Bank ventured deeper into the sub-5% fix-rate zone with a 4.79% rate on a two-year 80% LVR loan.
While many regionals like P&N Bank and Suncorp Bank are beating the majors on short-term fixes, borrowers are advised to weigh up these products’ pros and cons.
The certainty only lasts for one year (in P&N’s case), after which the loan is likely to switch to a variable rate, which could be less competitive compared to other lenders.
P&N Bank allows up to $25,000 in free-free early repayments during the one-year period; higher repayments are likely to incur adjustment costs.
Furthermore, with the RBA expected to cut rates again in the near future, locking into a fix now could be a gamble, considering most lenders have shown willingness to swiftly pass through RBA rate cuts.
For these reasons, fixed rates are a niche product in the current economic climate.
More immediate data is not available, but barely 2% of new loan commitments in August 2024 were fixes, according to Australian Bureau of Statistics data.
However, there is still uncertainty in what the RBA has up its sleeves. As of July, the banking majors had their end-of-year cash rate forecasts falling in the 3.1% and 3.35% ballpark.
But RBA Governor Michele Bullock has thrown out fixed signals, having recently cautioned that interest rate cuts could be postponed depending on consumer spending trends.
With so many variables at play, seeking advice from an accredited broker is always advised.
