Lenders lower fixed rates as markets position for RBA cut
Australian lenders are jockeying for position in anticipation of an interest-rate cut by the Reserve Bank, and here’s the proof.
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Seven Australian lenders have cut fixed mortgage rates this week by an average of 0.3 percentage points.
Further, four lenders made smaller cuts in the past few days, as the Australian economy prepares for the Reserve Bank to start slashing the cash rate sometime in the next four to six months.
Canstar analysis shows lenders are making moves ahead of the central bank.
“Expect the fixed rate cuts to continue rolling in over the next few months as we approach the tail end of the year and head towards a rate cut, potentially in the first few months of next year,” Canstar data director Sally Tindall said.
“There was the now-usual flood of fixed rate cuts this week, with seven lenders cutting a total of 138 fixed rates this week.
“Some of the biggest cuts were from Macquarie Bank, which slashed all its fixed-term rates, in some cases down to a highly competitive 5.39 per cent.”
Excluding eco-friendly “green loans”, Macquarie has the lowest two, four and five-year fixed rates.
NAB moved on Tuesday to bring its three-year fixed rate to 5.89 per cent, in line with the other big three banks.
More and more lenders are bringing variable rates under 6 per cent, including the most recent, HSBC.
“This cut will help keep some heat in the refinancing market, which has been more or less losing steam since mid last year,” Ms Tindall said.
Canstar analysis of ABS data shows about $16bn of loans are refinanced every month this year, down from the peak of refinancing in July 2023 when more than $21bn in loans switched lenders.
Most two and three-year fixed loans are now a full percentage point below standard variable rates.
But the Reserve Bank is standing firm and holding the cash rate at 4.35 per cent for the time being.
The RBA says “all options” are on the table as inflation painstakingly inches downward. Key quarterly inflation data will be released at the end of this month.
Peer economies around the world have cut rates this year, but RBA governor Michele Bullock has consistently reminded rate watchers those economies ended the period of escalating inflation with much higher interest rates.
Canada’s central bank held rates at 5 per cent from September 2023 to April, and three cuts at the past four meetings have lowered their cash rate to 4.25 per cent.
“I understand that people are hurting from high interest rates … (but) it’s actually high inflation that is really causing trouble for people,” Ms Bullock said last month.
Monthly annualised inflation ticked down from 3.5 to 2.7 per cent in August.
On the periphery, some Australian economists have voiced concerns the RBA may end up waiting too long and end up being in a position to cut once the global economy swings back into a tightening pattern.
The ASX rate indicator calculator shows just 12 per cent of Australian traders predict the RBA will make a cut at its November 4 meeting, down from 19 per cent a week ago.
Commonwealth Bank is an outlier among the big banks, predicting a 25 basis point cut in December. Westpac and ANZ forecasts the RBA will rip the Band-Aid off in February.
NAB recently pulled their prediction forward from May to February.
In August, the consumer watchdog called out ANZ, CommBank and NAB for lowering their 12-month deposit rates between 20 and 65 basis points over the course of six months while keeping 12-month fixed mortgage rates unchanged.
Originally published as Lenders lower fixed rates as markets position for RBA cut
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