Fixed Loan Rates Down By Up To 1.6%

Fixed Loan Rates Down By Up To 1.6%

The Age
14 October 2008
Daniella Miletic Consumer Affairs Reporter

THREE of Australia's biggest banks have cut their fixed mortgage rates, but financial analysts believe the falls will do little to lure consumers from variable home loans.

As the popularity of fixed home loan products continues to decline, Westpac, ANZ and National Australia Bank yesterday dropped their fixed rates by as much as 1.6 percentage points. A Commonwealth Bank spokesman said a decision about fixed rates would be made later this week.

But the cuts will not benefit consumers who locked in interest rates amid fears they would continue to rise. They are also unlikely to increase demand for fixed loans, with an increasing number of Australians anticipating further interest rate cuts.

Westpac, which is awaiting Treasurer Wayne Swan's approval for its merger with St George Bank, was the first to cut fixed rates by up to 1.1 percentage points yesterday morning.

The lender cut its three-year mortgages from 7.99% to 6.99%. It also cut its one, four and five-year fixed rates to 7.19%.

National Australia Bank also confirmed it would lower its fixed home loan rates by up to 1.6 percentage points. ANZ also cut fixed home loan rates, bringing its two, three and four-year loans down to 7.69%.

Demand for fixed-rate loans has fallen for seven consecutive months, according to data by mortgage broker Mortgage Choice.

The figures show a cut in interest rates in September caused a drop in demand for fixed loans from 4.73% of all loans in August to 1.95% last month. This compares with a six-month average of 12.07% and a 12-month average of 12.49% for fixed loans.

"Australian borrowers are reasonably canny in the sense that in a rising rate environment the demand for fixed-rate loans increased and increased quite substantially," said financial analyst Stewart Oldfield, of Baillieu Stockbroking.

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