Lenders cut fixed rates despite the Reserve Bank’s cash rate hikes

The Reserve Bank of Australia’s rapid-fire cash rate hikes might be hitting some homeowners hard in the wallets after many lenders chose to pass the increases in full to their variable-rate customers.

But there could be a light at the end of the tunnel for borrowers worried about rising rates. That’s after experts at Commonwealth Bank adjusted their forecasts as they now believe the RBA will reverse course and cut interest rates in the second half of 2023.

They’re not the only ones to think so, with economists at Westpac and ANZ pencilling in rate cuts by mid-2024. 

Lenders are starting to price in these rate expectations; as a result, they’re starting to reduce interest rates on some of their fixed-rate home loans. Take Commonwealth Bank, which cut owner-occupier rates on its four-year fixed term by 1.60 percentage points to 4.99%. That’s below CBA’s standard variable rate of 5.80%.

CBA is joined by a growing roll call of other lenders –  including Westpac, Macquarie Bank and Suncorp – that have all cut at least one fixed rate since the RBA’s August monetary policy meeting.

Should you fix or go variable?

So we’re in a slightly confusing interest rate environment right now.

Variable rates have been rising, and are likely to rise further, as the RBA will almost certainly make several more cash rate increases.

Fixed rates, though, might have peaked and might even be trending down. 

That begs the question: should you lock in a fixed rate now to avoid the impact of more cash rate hikes in the short term or hold your nerve on a variable rate?

As always, there isn’t one answer as it depends on your individual financial situation. Eventus Financial would be happy to discuss the pros and cons of each option with you. By the way, there’s also a third option, which is to get a split loan – part fixed and part variable.

It’s also a good idea to compare your current home loan with others in the market to check you are still on a competitive deal, particularly as many lenders are competing hard for new business. Again, Eventus Financial can help you weigh up the pros and cons of refinancing.

Looking for the best mortgage broker in Sydney? Eventus Financial is an award-winning Sydney mortgage broker with over 335 five-star Google reviews. Schedule a no-obligation consultation with Alex to find out how we can help you with your home loan.