ANZ-owned regional digs deep into sub-5% territory, but are fixes still out of vogue?
Suncorp Bank has ventured further into sub-5% territory with its latest two-year fix offer.
Almost all major lenders acted swiftly when the Reserve Bank of Australia (RBA) slashed the overnight rate by 25 basis points in August.
4.99% quickly emerged at the industry standard on a two-year fix, but Suncorp Bank has sharpened its competitive edge by trimming another 20 basis points to 4.79% on an 80% LVR loan.
At the time of writing, it was a sharper deal than comparative loans offered up by the Big Four (including Suncorp Bank’s parent company ANZ) and Macquarie.
For how long though, is another question, given the hotly competitive nature of Australia’s mortgage market.
Additionally, the majority of buyers remain reluctant to move off their variable loans to a fix, given the likelihood of the RBA slashing the cash rate at least once again before the year comes to a close.
While more immediate data is not available, barely 2% of new loan commitments in August 2024 were fixes, according to Australian Bureau of Statistics data.
“While there are some great fixed rates at the moment… I do think it’s too early to fix,” Melissa Gielnik, mortgage broker and founder at Smart Lending, recently told MPA. “I think there are more rate cuts to come, so if people can pay a higher amount off their loan after the next one, that forced savings will help them reduce debt.”
Yet “reluctance for borrowers to fix their home loans has been easing recently”, Dan Nicotra (pictured), Suncorp Bank’s head of home lending product, told MPA on Tuesday.
Nicotra explained that sentiment for fixed-rate lending generally comes from two places:
- what borrowers anticipate will happen with the cash rate over the short to medium term
- how competitive fixed interest rates are (including the weighted average rate of a fixed/variable split solution)
“Recently we have seen stable conditions across inflation and the labour market, however, variable rates are largely in the mid 5%’s, so a competitive fixed rate can be around 75bps lower than the alternative variable rate, which will be central in cost to customer conversations between customers and their broker or lender,” said Nicotra.
Each member of the Big Four banks expects the RBA to push through another 25-basis-point cut in November.
What does Nicotra think?
Without giving a concrete forecast, he said: “In the last five RBA Board meetings we have seen the cash rate drop three times, totalling 75bps. We have also read in the August Monetary Policy Board statement that while underlying inflation has started to moderate, there is still uncertainty in the domestic and global economic outlook.
“The board have stated that their priority will be to maintain price stability and full employment, and given a relatively stable labour market with slightly improved participation rate, could see more downward movement, however only if not at the expense of price stability.”
