One of the Big Four banks has slashed fixed rates by up to 0.70 per cent. (Source: AAP)
Westpac has become the first of the Big Four banks to slash fixed rates below 5 per cent. Lenders, big and small, have been carefully carving out their fixed rates after moves from the Reserve Bank (RBA) to lower the cash rate.
It’s an attempt to lure people away from the potential of falling variable rates and onto something that stays put for one to five years. But Canstar’s data insights director, Sally Tindall, said Westpac has taken the lead compared to Commonwealth Bank (CBA), ANZ, and NAB.
“It’s a decisive move from the big four bank. Today’s cuts mean Westpac now has the lowest fixed rate out of the majors,” she said.
“The move is likely to be in response to an easing in the cost of fixed-rate funding and the strong possibility of further easing from the RBA.
“There’s also likely to be an element of competition driving Westpac’s decision today, despite the fact that fixing is not yet back in vogue with customers.
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“This is also the first time in the current cutting cycle that a big bank has dropped a fixed rate below the 5 per cent benchmark. That’s a considerable milestone and signals just how competitive the mortgage market is.”
Westpac’s two-year fixed rate is now 4.89 per cent, which is a drop of 0.70 per cent.
It has also dropped its other fixed rates by 0.30 to 0.60 per cent, with the highest rates being four and five-year terms at 5.59 per cent.
ANZ and NAB have the second-lowest two-year fixed rate at 5.19 per cent.
Meanwhile, Commonwealth Bank offers a 5.44 per cent rate for the same term period.
Westpac’s one-year rate is 5.19 per cent, while NAB and ANZ offer 5.29 per cent, and CBA is at 5.49 per cent.
The bank with the highest rate is CBA at 5.94 per cent for a five-year term, compared to Westpac’s 5.59 per cent, NAB’s 5.69 per cent, and ANZ’s 5.74 per cent.
But Westpac isn’t the top of the charts compared to smaller lenders:
One-year fixed rate: Pacific Mortgage Group offers the lowest at 4.84 per cent
Two-year fixed rate: East Street Financial Services is at 4.69 per cent
Three-year fixed rate: Pacific Mortgage Group is at 4.84 per cent
Four-year fixed rate: BOQ, Macquarie Bank, People’s Choice offer 5.29 per cent
Five-year fixed rate: BOQ, Heritage Bank, Macquarie Bank, People’s Choice offer 5.29 per cent
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Tindall said it’s a hard question to answer.
A poll of more than 3,900 Yahoo Finance readers found 31 per cent would take a fixed rate to access quicker savings.
The RBA could usher in another rate cut by November, which would bring the cash rate down from 3.60 per cent to 3.35 per cent.
There are also some predictions that there could be additional reductions in February and May, which would pull the official interest in the 2 per cent region.
Tindall said choosing whether to fix your rate or keep it variable is “a crystal ball exercise”.
“The maths between the lowest fixed and variable rates is tight and ultimately depends on the future of the cash rate,” she said.
“While the RBA has said that further easing is likely, there’s still not a huge amount of clarity on how many cuts are to come in the cycle. Plus, there’s always the wildcard that some banks might not pass on future cuts in full.
“With so many variables at play, it’s no surprise the majority of borrowers are sticking with variable for now, because the consequences of getting fixed rate decisions wrong can often be more significant.”
She said if you do decide to fix your rate, spend a bit of time finding the most competitive rate.
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