SMSF – ATO finalises its position in relation to event-based reporting
After detailed consultation with the self-managed super fund (SMSF) sector, the ATO announced today that its i
Growing bets of a cut in official interest rates have dragged a key influence on fixed-rate loans lower in recent weeks, which alongside Westpac’s rate increase could prompt more customers to consider fixing their mortgage.
Interest rates for fixed two and three-year home loans are near record lows, and some smaller lenders continue to cut these rates to compete.
Added to this is Westpac’s move last week to lift variable home loan rates by 0.2 percentage points, which mortgage brokers and analysts say will prompt more borrowers to consider fixing their home loan.
Comparison website RateCity has experienced a 25 per cent lift in comparisons by customers on the site in the days after Westpac’s move.
“There are over 10 lenders in the market offering variable rates under 4 per cent, so with rates now starting at 4.78 per cent for owner occupiers, Westpac is starting to look like a pretty expensive option,” RateCity financial analyst Peter Arnold said.
Mortgage Choice spokeswoman Jessica Darnbrough said demand for fixed-rate home loans was low at the moment, but that could change after Westpac’s rate rise.
“As speculation mounts that the other major lenders may follow Westpac’s lead and lift their interest rates, I wouldn’t be surprised to see more home owners look to fix their rates,” she said.
Banks that have cut fixed rates in recent weeks include industry super fund-owned bank ME, Commonwealth Bank’s Bankwest, Newcastle Permanent, and Heritage Bank.
John Caelli, general manager of markets at ME, said the bank had lowered its two-year fixed rate to 3.89 per cent last week against the backdrop of lower swap rates.
This is a key benchmark financial market rate that allows banks to hedge their risk in fixed-rate lending.
Mr Caelli said the two-year swap rate had declined to the current 1.9 per cent, equal to a 10-year low, from near 2.1 per cent in mid-September.
“We have seen a bit of a fall in swap rates in the order of 10 or 15 basis points,” he said.
Changing expectations about official interest rates in Australia and the US were probably behind the change in swap rates, Mr Caelli said.
In recent weeks there have been growing market bets the Reserve Bank of Australia will cut interest rates another quarter of a percentage point to 1.75 over the next six months as it tries to stimulate a weak domestic economy. Markets are pricing in an 80 per cent chance of a cut by April.
At the same time, investors have predicted the US Federal Reserve may wait longer to raise its rates.
Fixed rates are influenced by expectations about future moves in official interest rates, which means they tend to move in advance of variable rates.