The Commonwealth Bank has quietly cut its fixed mortgage rate by 40 basis points in a sign that interest rate cuts are expected by the end of 2023.
Australia’s largest mortgage lender on Friday slashed the three-year fixed rate for owner-occupiers paying principal and interest to 5.59 percent, down 0.4 percentage points from 5.99 percent.
The flat rate is even cheaper than the Commonwealth Bank’s variable rate of 5.64 percent for borrowers with a 20 percent mortgage deposit, and it’s the lowest three-year rate of the big four banks.
The banks often set their fixed rate mortgages based on expectations about interest rates.
The Commonwealth Bank expects the Reserve Bank of Australia to raise interest rates again to 3.85 percent, up from the current 11-year high of 3.6 percent.
But after that, CBA’s head of Australia’s economy Gareth Aird expects two rate cuts in late 2023, followed by two more rate cuts in early 2024, which would bring the cash rate back down to 2.85 percent.
The Commonwealth Bank (Melbourne branch, pictured) has quietly lowered its fixed mortgage rate by 40 basis points, signaling that rate cuts are expected by the end of 2023. of principal and interest to 5.59 percent, down 0.4 percentage points from 5.99 percent
RateCity research director Sally Tindall said the other big banks would likely start lowering their fixed rates based on the expectation that the Reserve Bank was done with its rate hikes.
“While the majority of the four major bank rate changes so far this year have been increases, the tide is beginning to turn as we approach the peak of cash rates, especially among smaller lenders,” she said.
The Commonwealth Bank’s three-year fixed rate of 5.59 percent is the lowest of the four major banks for a longer-term loan.
“As part of our ongoing review of borrowing costs, interest rates and market conditions, we have announced changes to new home loans for our three-year fixed rate home loan,” a spokeswoman told Daily Mail Australia.
But smaller lenders still offer the best deals with The Capricornian, a Rockhampton-based credit union, offering 4.99 percent for three years.
Macquarie Bank offers 5.35 percent over five years.
The four major banks have yet to offer competitive fixed rates compared to the smaller lenders.
But Westpac offers a flat rate of 5.54 percent for a year, compared to ANZ’s offer of 5.99 percent for the same period.
Westpac expects another rate hike from the RBA in May, while ANZ sees that happen in August.
NAB’s fixed rates – from one to five years – all have a “six” in front of them, even though it is the only major bank to predict the end of the Reserve Bank’s rate hikes.
RateCity research director Sally Tindall said the other big banks would likely start lowering their fixed rates based on the expectation that the Reserve Bank was done with its rate hikes.
The Reserve Bank of Australia left interest rates unchanged in April, marking the first pause in a year after 10 consecutive monthly increases.
But the minutes of that board meeting suggested that a rate hike was still being considered this month.
“Members at this meeting first discussed the matter for a further increase in the cash rate by 25 basis points,” the minutes read.
‘This case was again based on the finding that inflation remained too high and the labor market was very tight.’
The 30-day interbank cash futures market now expects interest rate cuts in June 2024, following recent price cuts from mid-2023.
Inflation reached a 32-year high of 7.8 percent in 2022.
While the monthly benchmark eased to 6.8 percent for February, headline inflation is still well above the RBA target of 2 to 3 percent, while unemployment remained at a 48-year low of 3.5 percent in March.
But smaller lenders still offer the best deals with The Capricornian, a Rockhampton-based credit union, offering 4.99 percent for three years (pictured is a sponsored triathlon in central Queensland)
