Home loan rates to fall further and possibly into the two per cent range

Mortgage customers could be on track to receive new record-low rates if the Reserve Bank drops the cash rate on Tuesday. This could mean rates starting with a “2” are coming your way soon.

Mortgage customers could be on track to receive new record-low rates if the Reserve Bank drops the cash rate on Tuesday.

While the lowest variable rates are just 3.44 per cent, borrowers could see rates fall further and into the two per cent range if the central bank cuts rates.

The cash rate has sat at 1.5 per cent since August 2016 and with an each-way bet on whether it will fall this week, experts say customers could see the further lowering to their interest charges.

Financial comparison rate Mozo’s spokeswoman Kirsty Lamont said “it’s not out of the question that we could see home loan rates start with a two”.

“Right now we have got a handful of rates that are under the 3.5 per cent mark so if the Reserve Bank is to cut rates twice and lenders pass this on in full we could see the lowest deals drop below three per cent,” she said.

“The case is building for a rate cut with worse than expected inflation figures and another big fall in housing prices.”

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Latest CoreLogic figures showed national dwelling prices were down in April by 0.5 per cent and 7.2 per cent on an annual basis.

This is the largest drop since the 12 month to February 2009.

Australians could soon see interest rates with a “2” in front.

The latest inflation figures were zero and only 1.3 per cent for the year - well below the target of 2-3 per cent.

Aussie Home Loans’ chief executive officer James Symond said it remained an even bet whether the RBA would cut rates this week.

“If they don’t move on Tuesday it is likely they will move lower over the next few months,” he said.

And he said this would deliver cheaper mortgage costs for customers.

“Borrowers should expect their mortgage rates to probably fall either Tuesday or in the next few months and at least some lenders will pass on at least part, if not all, the cut,” Mr Symond said.

“If borrowers see rates starting with a 2 it would not mean good news for the economy as it would indicate there are problems.”

Just last week big bank Westpac hiked some credit card interest rates by 0.25 per cent — a move which rarely happens in the cards market.

Ms Lamont said this is a sign banks are under pressure and are looking to increase their revenue across various products.

Mozo’s database shows the cheapest variable loan rate on a $300,000 30-year mortgage with principal and interest rates is 3.44 per cent by FreedomLend.

The monthly repayments on this loan are $1337.

@sophieelsworth