The Commonwealth Bank has quietly slashed its fixed mortgage rates by 40 basis points in a sign interest rate cuts are expected in late 2023.
Australia’s biggest home lender on Friday cut its three-year fixed rate for owner-occupiers paying off principal and interest to 5.59 per cent, down 0.4 percentage points from 5.99 per cent.
The fixed rate is even cheaper than the Commonwealth Bank’s 5.64 per cent variable rate for borrowers with a 20 per cent mortgage deposit, and is the lowest three-year rate among the big four banks.
The banks often set their fixed-rate mortgages based on expectations about interest rates.
The Commonwealth Bank is expecting the Reserve Bank of Australia to raise rates one more time to 3.85 per cent, up from an existing 11-year high of 3.6 per cent.
But after that, CBA’s head of Australian economics Gareth Aird is expecting two rate cuts in late 2023, followed by two more rate cuts in early 2024, that would take the cash rate back down to 2.85 per cent.
The Commonwealth Bank (Melbourne branch, pictured) has quietly slashed its fixed mortgage rates by 40 basis points in a sign interest rate cuts are expected in late 2023. Australia’s biggest home lender on Friday cut its three-year fixed rate for owner-occupiers paying off principal and interest to 5.59 per cent, down 0.4 percentage points from 5.99 per cent
RateCity research director Sally Tindall said the other major banks were likely to start trimming their fixed rates, based on the expectation the Reserve Bank had finished its rate increases.
‘While the majority of the big four bank fixed rate changes have been hikes so far this year, the tide is starting to turn as we approach the cash rate peak, particularly among smaller lenders,’ she said.
The Commonwealth Bank’s 5.59 per cent fixed rate for three years is the lowest among the big four banks for a longer-date loan.
‘As part of our ongoing review of funding costs, interest rates and market conditions, we announced changes to new home loan borrowings for our three-year fixed rate home loan,’ a spokeswoman told Daily Mail Australia.
But smaller lenders are still offering the best deals with The Capricornian, a Rockhampton-based credit union, offering 4.99 per cent for three years.
Macquarie Bank is offering 5.35 per cent over five years.
The big four banks are yet to offer competitive fixed rates, compared with the smaller lenders.
But Westpac is offering a 5.54 per cent fixed rate for one year, compared with ANZ’s offer of 5.99 per cent for the same time frame.
Westpac is expecting one more rate increase from the RBA in May while ANZ sees that occurring in August.
NAB’s fixed rates – from one to five years – all have a ‘six’ in front of them, even though it’s the only major bank to forecast the end of Reserve Bank rate hikes.
RateCity research director Sally Tindall said the other major banks were likely to start trimming their fixed rates, based on the expectation the Reserve Bank had finished its rate increases
The Reserve Bank of Australia left interest rates on hold in April, marking the first pause in a year following 10 consecutive monthly hikes.
But the minutes of that board meeting suggested a rate rise was still considered this month.
‘Members first discussed the case for a further 25 basis point increase in the cash rate target at this meeting,’ the minutes said.
‘This case was again founded on the observation that inflation remained too high and the labour market was very tight.’
The 30-day interbank cash futures market is now expecting rate cuts in June, 2024, after recently pricing in cuts from mid-2023.
Inflation in 2022 hit a 32-year high of 7.8 per cent.
While the monthly measure for February eased to 6.8 per cent, headline inflation is still well above the RBA’s 2 to 3 per cent target, with unemployment in March remaining at a 48-year low of 3.5 per cent.
But smaller lenders are still offering the best deals with The Capricornian, a Rockhampton-based credit union, offering 4.99 per cent for three years (pictured is a sponsored triathlon in central Queensland)
