RBA announced the history-making rate cut on November 3rd in which they slashed the cash rate to a record low of 0.10%.
The big four banks have made significant rate cut to fixed home loan rates. One of the major banks has reduced the fixed-rate to the lowest ever at just 1.98% p.a. (effective from November 10).
Commonwealth Bank is the first of the big four to slash their fixed-rate to the lowest it has ever been while keeping the variable rates intact.
CBA announced further reductions to fixed loan rates including a substantial 100bp cut (effective from November 11) – the lowest ever advertised home loan rate ever offered by the Commonwealth Bank.
Following the footsteps of CBA, Westpac announced a new fixed interest rate (effective from November 9) on a four-year term for owner-occupiers.
The drastic measures of major banks’ rate cuts are because they want to play a vital role to help recover the Australian economy which has been hard hit by the covid-19 pandemic which resulted in inflation, mortgage deferrals and loss of employment.
NAB acted by cutting a number of fixed rate products by up to 81 basis points (effective from November 10).
ANZ was the last of the big four to announce its the rate cut. The bank made cuts of 40 basis points across select fixed-rate loans (effective from November 5).
These changes will fuel homebuyers to seek home loans with confidence and credit recovery support.
How much can I save if I fix my home loan?
You can calculate the costs by using our repayment calculator below.
To give you a simple overview, the following table explicates the amount of savings you can get.
| Home Loan Amount | Current 4 year fixed interest rate(2.99%) | New 4 year fixed interest rate (1.99%) | Savings (per month) |
|---|---|---|---|
| $250,000 | $1,039 | $922 | $117 |
| $500,000 | $2,078 | $1,843 | $235 |
| $1,000,000 | $4,157 | $3,686 | $471 |
Note: The interest rate used above is NAB’s current rates versus the new rates applicable from November 10.
What are the pros and cons of fixing right now?
The record-low interest rates might entice you to think about whether you should fix your home loan to take advantage of the current competitive rates.
Before you make any changes, you have to weigh the pros and cons of fixing your home loan rate.
Pros:
- It gives you certainty that the interest rates won’t change during the fixed period
- If interest rates rise during the fixed period, you don’t have to pay more
Cons:
- Fixed rates are typically a lot less flexible, usually with no offset account, limits on extra repayments
- Your current lender will charge you a break fee if you want to get out of the fixed-rate term
- You have to pay a hefty break cost fee if you want to sell your property or refinance your home loan during with a locked interest rate
- You won’t get any benefits if the interest rates fall lower
Since it is difficult to know for sure if the rates will go even lower in the future, you might benefit from getting a low fixed rate now.
Remember, fixed-rate loans usually only last up to five years, at the end of the fixed-rate period the bank will offer you to re-lock your rate.
However, if you don’t re-fix the interest rate, then the bank will usually put you on the bank standard variable rate.
Is this the best time to refinance?
With so many lenders cutting their rates, they are all competing with each other to be the first choice for the customers.
You need to ask for a better deal with your lender, and if they refuse to pass on any rate cuts that could benefit you, then you should refinance.
Additionally, If your mortgage is coming to the end of its fixed rate term, this is the best time switch to a new lender.
Before you make the bold move, you’ll need to take into account any upfront and ongoing costs associated with your existing mortgage and switching to the new one.
You can read more about this in our when should I refinance my home loan page.
What are honeymoon rates?
Lower rates are good news for you, but the honeymoon rate might blind you.
A honeymoon rate, or an introductory rate, is a special interest rate discount offered on some home loan packages usually for the first 6 to 12 months.
Lenders offer their lowest rates to new customers in the first year as bait to get you hooked with their products and services.
It would help if you considered the Bank Standard Variable Rate (BSVR rate) that will be applied by the lender after the introductory period ends.
It is essential to check the terms and speak with your lender or broker after the honeymoon period has expired!
Get the experts on your side!
It requires a lot of research to understand which home loan features are right for you. Also, depending on your situation, fixing the interest rate is not for everyone.
Our brokers can adequately consider your situation and recommend a competitive home loan package that best suits your needs.
Contact us on 1300 889 743 or fill in our free assessment form and we can tell whether you should take advantage of this fantastic four year fixed rate.