Australians keeping an eye on their finances just got a big reason to revisit their mortgage strategy. With a major bank making headlines by slashing its fixed rates, the lending landscape is shifting fast.
Whether you’re nearing retirement, already enjoying it, or simply looking to cut down your monthly bills, these developments could have a real impact on your bottom line. The question now is—what’s the smartest move in a market poised for more change?
In a move that’s set the financial world abuzz, Macquarie Bank, a prominent player in the Australian banking sector, has made a bold decision to dramatically reduce its fixed mortgage rates. This strategic cut is not just a mere adjustment; it’s a significant 20 basis point reduction across one to five-year fixed rates.
Why the sudden change? It appears that Macquarie Bank, along with other major banks, is anticipating a series of aggressive rate cuts from the Reserve Bank of Australia (RBA) in the near future. With the RBA expected to lower interest rates on May 20, followed by further reductions in 2025, lenders are positioning themselves competitively in what’s becoming a heated fixed-rate mortgage market.
For those considering their mortgage options, Macquarie now offers a two or three-year fixed rate at an enticing 5.19 per cent, while a longer-term commitment of four or five years is set at 5.39 per cent. These rates are particularly attractive when compared to the current variable rates and are among the lowest in the market, especially outside of eco loans.
However, the decision to fix a mortgage rate now does come with a caveat. Borrowers who lock in their rates might miss out on potential savings if the RBA continues to slash rates and these cuts are passed on to variable rate customers. The 30-day interbank futures market is predicting the RBA cash rate to plummet from 4.1 per cent to 3.1 per cent by the year’s end. This could mean that a borrower with a 20 per cent deposit, currently on a 5.94 per cent variable rate, might be better off waiting for their rate to potentially drop to 4.94 per cent, rather than fixing at 5.19 per cent for two years.
Canstar’s data insights director, Sally Tindall, has highlighted the intensifying competition in the fixed-rate mortgage space, suggesting that Macquarie’s rate cut is a strategic move to stay ahead in the market. Yet, Canstar’s analysis also indicates that even with a less aggressive RBA rate cut of 75 basis points, a variable rate could still be more beneficial than a fixed rate for borrowers.
For the eco-conscious and energy-efficient homeowners, Bank Australia is offering the lowest three-year fixed rate of 4.94 per cent for new builds powered by solar panels. This is a testament to the growing trend of banks incentivising sustainable living.
As we navigate these financial waters, it’s crucial for Australians to consider their options carefully. With the Big Four banks all expecting a May 20 rate cut, and NAB predicting an even steeper 50 basis point reduction, the landscape of mortgage rates is shifting rapidly. Westpac’s chief economist, Luci Ellis, a former RBA assistant governor, believes a 25 basis point cut is more likely, suggesting that Australia’s economy is resilient enough to withstand global economic pressures without the need for drastic RBA interventions.
With the official inflation data for the March quarter set to be released soon, the RBA’s next move could hinge on whether inflation falls back within its 2 to 3 per cent target range. This data will be a key determinant in the RBA’s decision-making process and could influence whether further rate cuts are on the horizon.
As the mortgage landscape shifts, it’s important to consider how these changes might affect everyone, whether you’re currently managing a mortgage or simply planning for the future.
Have you considered fixing your mortgage rate, or are you sticking with a variable rate in anticipation of further RBA cuts? If you’re not currently dealing with a mortgage, how do you think these changes might influence future homeowners or the economy overall? Feel free to join the conversation in the comments below!
Also read: Interest rate relief arrives today—find out how much you could save
