If you’re a homeowner, a mortgage holder, or simply someone keeping a close eye on the economy, there’s some welcome news on the horizon.
The Reserve Bank of Australia (RBA) is widely tipped to cut interest rates next week, and the banks are already making moves in anticipation.
For millions of Australians, this could mean a little more breathing room in the household budget—and perhaps a few more dollars left over for life’s little luxuries.
ANZ leads the charge with fixed rate cuts
In a move that’s sure to catch the attention of anyone with a home loan, ANZ has slashed its fixed mortgage rates across the board.
The bank has trimmed its one-to-five-year fixed rates by up to 35 basis points, with the three-year fixed rate now sitting at 5.34 per cent.
One-year and two-year fixed rates have also dropped, now at 5.29 per cent and 5.19 per cent respectively. Even the four and five-year fixed rates have been cut to 5.74 per cent.
This is a significant shift, especially considering that just days ago, ANZ was the only one of the Big Four banks predicting the RBA would hold off on a rate cut until August.
But after some lacklustre retail sales data and ongoing uncertainty in global trade (not to mention the looming expiry of Donald Trump’s 90-day tariff pause), ANZ has changed its tune. The bank now expects the RBA to cut the cash rate by 25 basis points at its July meeting.
What does this mean for your mortgage?
If you’re currently on a variable rate, you’re probably wondering how much you stand to save.
Should the RBA go ahead with the expected cut, the average borrower with a $660,000 mortgage could see their monthly repayments drop by around $106.
And if the RBA continues to cut rates as the market expects—with further reductions possible in August and November—the cash rate could fall to 3.1 per cent by the end of 2025.
That’s a level we haven’t seen since early 2023.
For ANZ customers, a full pass-through of the RBA’s cut would see the variable rate drop from 5.59 per cent to 4.84 per cent.
That’s actually lower than the bank’s lowest fixed rate, so it pays to keep an eye on the numbers and consider whether fixing your rate is the right move for you.
Credit: ABC News In-depth / YouTube
Fixed vs variable: What’s the best move?
With fixed rates dropping, you might be tempted to lock in a deal. But as Canstar’s data insights director Sally Tindall points out, there are now 13 different lenders offering at least one fixed rate under five per cent.
Non-bank lenders like Easy Street and Pacific Mortgage Group are leading the pack, with two-year and one-year fixed rates at 4.95 per cent and 4.99 per cent respectively.
It’s also worth remembering that fixed-rate loans can come with hefty exit fees if you want to break the contract early to take advantage of falling variable rates.
In fact, only three per cent of ANZ’s residential mortgage book is currently on fixed rates—the vast majority of borrowers are on variable rates and can switch at any time without major penalties.
So, if you’re considering fixing your rate, don’t just settle for a rate that starts with a five or a six. Shop around, compare offers, and look for something in the fours if you can.
Why are rates falling now?
The RBA’s decision to cut rates is being driven by a combination of factors. Inflation is finally coming back within the central bank’s target range, with the consumer price index rising by just 2.1 per cent over the past year.
At the same time, economic growth remains sluggish, and Australians are still reluctant to spend. The latest retail trade data shows only a 0.2 per cent increase in May, with spending at cafes, restaurants, and takeaway outlets flatlining.
With the economy in need of a boost and inflation under control, the RBA has the green light to lower rates and stimulate growth.
Credit: 9 News Australia / YouTube
What should you do next?
If you have a mortgage, now is a great time to review your options. Check your current rate, compare it with what’s on offer elsewhere, and don’t be afraid to negotiate with your lender.
If you’re thinking about fixing your rate, weigh up the pros and cons—and remember to factor in any potential exit fees.
And if you’re one of the many Australians who rely on savings interest, keep in mind that lower rates can mean lower returns on your deposits.
It might be time to shop around for a better deal or consider other ways to make your money work harder.
Have your say
Are you planning to fix your mortgage rate, or will you stick with variable? Have you noticed your bank passing on rate cuts in full, or are you still waiting for some relief? And how are you feeling about the state of the economy as we head into the second half of 2024?
We’d love to hear your thoughts and experiences. Share your comments below and join the conversation with other YourLifeChoices members!
Also read: Commonwealth Bank tips back-to-back rate cuts as inflation falls
