Fixed rates fall to all-time low

It pays to shop around for a home loan. Source: Supplied

FIXED interest rates have fallen to an all-time low - but most home loan customers are failing to take advantage.

Some financial institutions are offering three-year fixed rates below five per cent and experts believe they will not fall any lower.

By comparison, major lenders' standard variable rates are still averaging more than 5.7 per cent, even after the typical 0.7 per cent discount.

Yet the latest data from the Australian Bureau of Statistics shows only 12 per cent of customers who took out mortgages this year have fixed their loans, compared to more than 20 per cent who locked in a rate above 8 per cent in 2007 in the run-up to the global financial crisis.

Those currently on a variable interest rate are, in effect, betting it will not only fall lower than fixed offers - but that it will continue to fall.

For example, if in the next 18 months their variable rate was cut by 0.25 per cent three times to less than 5 per cent, there would still need to be three further cuts in the subsequent year and a half to make up for the additional interest costs incurred in the first 18 months.

This calculation does not take into fees. While some economists are forecasting further official rate cuts, HSBC economist Paul Bloxham said it was unlikely the Reserve Bank of Australia would reduce borrowing costs further  the cash rate has remained at 3 per cent since December.

"In our view we don't think the RBA is going to cut the cash rate any further so you would think it is not an unreasonable time to be considering potential fixing," he said.

"Fixed rates certainly look very competitive at the moment relative to history."

If the average discounted variable rate remained unchanged, a household which had $300,000 would pay nearly $8000 more in interest over three years than a family that fixed at 4.99 per cent. Again, this calculation does not take into account fees.

ABS figures showed after the GFC customers steered away from fixed loans with just 5 per cent of new customers locking in rates in both 2009 and 2010.

But in recent years the numbers have slightly increased, 8 per cent of customers locked in rates in 2011 while 13 per cent locked in their loans in 2012.

1300HomeLoan managing director John Kolenda said it's unlikely fixed rates will dip further and borrowers should pounce.

"I think we're very close to bottom of the cycle with fixed rates," he said.

"There's certainly been some great pricing out there by some of the majors on fixed rates for two or three terms, we've seen anything from 4.79 per cent to 4.99 per cent, they are at all-time record lows.

"So there's all indications we're near the bottom of the rate cycle for fixed rates."

Mortgage Choice spokeswoman Belinda Williamson said they had seen as easing of customers fixing loans in the first quarter of 2013 compared to the March quarter last year.

The average percentage of fixed rate loans over the March quarter was 20.78 per cent of new loan approvals, she said.

This compared to 22.67 per cent during the same period in 2012.Ms Williamson said many customers could be holding off on fixing their loans in the hope rates would fall further.

Canstar analyst Mitchell Watson said a lower interest rate could save a home loan customers thousands of dollars across the term of their loan.

"Depending on the size of your mortgage, a one per cent difference in interest rate can equate to several thousand dollars variation in interest costs per annum," he said.

"Variable interest loans tend to be more popular in Australia but those who are currently shopping for a new mortgage might do well to consider locking in."

View the original article here

Fixed rates fall to all-time low

It pays to shop around for a home loan. Source: Supplied

FIXED interest rates have fallen to an all-time low - but most home loan customers are failing to take advantage.

Some financial institutions are offering three-year fixed rates below five per cent and experts believe they will not fall any lower.

By comparison, major lenders' standard variable rates are still averaging more than 5.7 per cent, even after the typical 0.7 per cent discount.

Yet the latest data from the Australian Bureau of Statistics shows only 12 per cent of customers who took out mortgages this year have fixed their loans, compared to more than 20 per cent who locked in a rate above 8 per cent in 2007 in the run-up to the global financial crisis.

Those currently on a variable interest rate are, in effect, betting it will not only fall lower than fixed offers - but that it will continue to fall.

For example, if in the next 18 months their variable rate was cut by 0.25 per cent three times to less than 5 per cent, there would still need to be three further cuts in the subsequent year and a half to make up for the additional interest costs incurred in the first 18 months.

This calculation does not take into fees. While some economists are forecasting further official rate cuts, HSBC economist Paul Bloxham said it was unlikely the Reserve Bank of Australia would reduce borrowing costs further  the cash rate has remained at 3 per cent since December.

"In our view we don't think the RBA is going to cut the cash rate any further so you would think it is not an unreasonable time to be considering potential fixing," he said.

"Fixed rates certainly look very competitive at the moment relative to history."

If the average discounted variable rate remained unchanged, a household which had $300,000 would pay nearly $8000 more in interest over three years than a family that fixed at 4.99 per cent. Again, this calculation does not take into account fees.

ABS figures showed after the GFC customers steered away from fixed loans with just 5 per cent of new customers locking in rates in both 2009 and 2010.

But in recent years the numbers have slightly increased, 8 per cent of customers locked in rates in 2011 while 13 per cent locked in their loans in 2012.

1300HomeLoan managing director John Kolenda said it's unlikely fixed rates will dip further and borrowers should pounce.

"I think we're very close to bottom of the cycle with fixed rates," he said.

"There's certainly been some great pricing out there by some of the majors on fixed rates for two or three terms, we've seen anything from 4.79 per cent to 4.99 per cent, they are at all-time record lows.

"So there's all indications we're near the bottom of the rate cycle for fixed rates."

Mortgage Choice spokeswoman Belinda Williamson said they had seen as easing of customers fixing loans in the first quarter of 2013 compared to the March quarter last year.

The average percentage of fixed rate loans over the March quarter was 20.78 per cent of new loan approvals, she said.

This compared to 22.67 per cent during the same period in 2012.Ms Williamson said many customers could be holding off on fixing their loans in the hope rates would fall further.

Canstar analyst Mitchell Watson said a lower interest rate could save a home loan customers thousands of dollars across the term of their loan.

"Depending on the size of your mortgage, a one per cent difference in interest rate can equate to several thousand dollars variation in interest costs per annum," he said.

"Variable interest loans tend to be more popular in Australia but those who are currently shopping for a new mortgage might do well to consider locking in."

View the original article here

Fixed rates fall to all-time low

It pays to shop around for a home loan. Source: Supplied

FIXED interest rates have fallen to an all-time low - but most home loan customers are failing to take advantage.

Some financial institutions are offering three-year fixed rates below five per cent and experts believe they will not fall any lower.

By comparison, major lenders' standard variable rates are still averaging more than 5.7 per cent, even after the typical 0.7 per cent discount.

Yet the latest data from the Australian Bureau of Statistics shows only 12 per cent of customers who took out mortgages this year have fixed their loans, compared to more than 20 per cent who locked in a rate above 8 per cent in 2007 in the run-up to the global financial crisis.

Those currently on a variable interest rate are, in effect, betting it will not only fall lower than fixed offers - but that it will continue to fall.

For example, if in the next 18 months their variable rate was cut by 0.25 per cent three times to less than 5 per cent, there would still need to be three further cuts in the subsequent year and a half to make up for the additional interest costs incurred in the first 18 months.

This calculation does not take into fees. While some economists are forecasting further official rate cuts, HSBC economist Paul Bloxham said it was unlikely the Reserve Bank of Australia would reduce borrowing costs further  the cash rate has remained at 3 per cent since December.

"In our view we don't think the RBA is going to cut the cash rate any further so you would think it is not an unreasonable time to be considering potential fixing," he said.

"Fixed rates certainly look very competitive at the moment relative to history."

If the average discounted variable rate remained unchanged, a household which had $300,000 would pay nearly $8000 more in interest over three years than a family that fixed at 4.99 per cent. Again, this calculation does not take into account fees.

ABS figures showed after the GFC customers steered away from fixed loans with just 5 per cent of new customers locking in rates in both 2009 and 2010.

But in recent years the numbers have slightly increased, 8 per cent of customers locked in rates in 2011 while 13 per cent locked in their loans in 2012.

1300HomeLoan managing director John Kolenda said it's unlikely fixed rates will dip further and borrowers should pounce.

"I think we're very close to bottom of the cycle with fixed rates," he said.

"There's certainly been some great pricing out there by some of the majors on fixed rates for two or three terms, we've seen anything from 4.79 per cent to 4.99 per cent, they are at all-time record lows.

"So there's all indications we're near the bottom of the rate cycle for fixed rates."

Mortgage Choice spokeswoman Belinda Williamson said they had seen as easing of customers fixing loans in the first quarter of 2013 compared to the March quarter last year.

The average percentage of fixed rate loans over the March quarter was 20.78 per cent of new loan approvals, she said.

This compared to 22.67 per cent during the same period in 2012.Ms Williamson said many customers could be holding off on fixing their loans in the hope rates would fall further.

Canstar analyst Mitchell Watson said a lower interest rate could save a home loan customers thousands of dollars across the term of their loan.

"Depending on the size of your mortgage, a one per cent difference in interest rate can equate to several thousand dollars variation in interest costs per annum," he said.

"Variable interest loans tend to be more popular in Australia but those who are currently shopping for a new mortgage might do well to consider locking in."

View the original article here

Fixed rates fall to all-time low

It pays to shop around for a home loan. Source: Supplied

FIXED interest rates have fallen to an all-time low - but most home loan customers are failing to take advantage.

Some financial institutions are offering three-year fixed rates below five per cent and experts believe they will not fall any lower.

By comparison, major lenders' standard variable rates are still averaging more than 5.7 per cent, even after the typical 0.7 per cent discount.

Yet the latest data from the Australian Bureau of Statistics shows only 12 per cent of customers who took out mortgages this year have fixed their loans, compared to more than 20 per cent who locked in a rate above 8 per cent in 2007 in the run-up to the global financial crisis.

Those currently on a variable interest rate are, in effect, betting it will not only fall lower than fixed offers - but that it will continue to fall.

For example, if in the next 18 months their variable rate was cut by 0.25 per cent three times to less than 5 per cent, there would still need to be three further cuts in the subsequent year and a half to make up for the additional interest costs incurred in the first 18 months.

This calculation does not take into fees. While some economists are forecasting further official rate cuts, HSBC economist Paul Bloxham said it was unlikely the Reserve Bank of Australia would reduce borrowing costs further  the cash rate has remained at 3 per cent since December.

"In our view we don't think the RBA is going to cut the cash rate any further so you would think it is not an unreasonable time to be considering potential fixing," he said.

"Fixed rates certainly look very competitive at the moment relative to history."

If the average discounted variable rate remained unchanged, a household which had $300,000 would pay nearly $8000 more in interest over three years than a family that fixed at 4.99 per cent. Again, this calculation does not take into account fees.

ABS figures showed after the GFC customers steered away from fixed loans with just 5 per cent of new customers locking in rates in both 2009 and 2010.

But in recent years the numbers have slightly increased, 8 per cent of customers locked in rates in 2011 while 13 per cent locked in their loans in 2012.

1300HomeLoan managing director John Kolenda said it's unlikely fixed rates will dip further and borrowers should pounce.

"I think we're very close to bottom of the cycle with fixed rates," he said.

"There's certainly been some great pricing out there by some of the majors on fixed rates for two or three terms, we've seen anything from 4.79 per cent to 4.99 per cent, they are at all-time record lows.

"So there's all indications we're near the bottom of the rate cycle for fixed rates."

Mortgage Choice spokeswoman Belinda Williamson said they had seen as easing of customers fixing loans in the first quarter of 2013 compared to the March quarter last year.

The average percentage of fixed rate loans over the March quarter was 20.78 per cent of new loan approvals, she said.

This compared to 22.67 per cent during the same period in 2012.Ms Williamson said many customers could be holding off on fixing their loans in the hope rates would fall further.

Canstar analyst Mitchell Watson said a lower interest rate could save a home loan customers thousands of dollars across the term of their loan.

"Depending on the size of your mortgage, a one per cent difference in interest rate can equate to several thousand dollars variation in interest costs per annum," he said.

"Variable interest loans tend to be more popular in Australia but those who are currently shopping for a new mortgage might do well to consider locking in."

View the original article here

Fixed rates fall to all-time low

It pays to shop around for a home loan. Source: Supplied

FIXED interest rates have fallen to an all-time low - but most home loan customers are failing to take advantage.

Some financial institutions are offering three-year fixed rates below five per cent and experts believe they will not fall any lower.

By comparison, major lenders' standard variable rates are still averaging more than 5.7 per cent, even after the typical 0.7 per cent discount.

Yet the latest data from the Australian Bureau of Statistics shows only 12 per cent of customers who took out mortgages this year have fixed their loans, compared to more than 20 per cent who locked in a rate above 8 per cent in 2007 in the run-up to the global financial crisis.

Those currently on a variable interest rate are, in effect, betting it will not only fall lower than fixed offers - but that it will continue to fall.

For example, if in the next 18 months their variable rate was cut by 0.25 per cent three times to less than 5 per cent, there would still need to be three further cuts in the subsequent year and a half to make up for the additional interest costs incurred in the first 18 months.

This calculation does not take into fees. While some economists are forecasting further official rate cuts, HSBC economist Paul Bloxham said it was unlikely the Reserve Bank of Australia would reduce borrowing costs further  the cash rate has remained at 3 per cent since December.

"In our view we don't think the RBA is going to cut the cash rate any further so you would think it is not an unreasonable time to be considering potential fixing," he said.

"Fixed rates certainly look very competitive at the moment relative to history."

If the average discounted variable rate remained unchanged, a household which had $300,000 would pay nearly $8000 more in interest over three years than a family that fixed at 4.99 per cent. Again, this calculation does not take into account fees.

ABS figures showed after the GFC customers steered away from fixed loans with just 5 per cent of new customers locking in rates in both 2009 and 2010.

But in recent years the numbers have slightly increased, 8 per cent of customers locked in rates in 2011 while 13 per cent locked in their loans in 2012.

1300HomeLoan managing director John Kolenda said it's unlikely fixed rates will dip further and borrowers should pounce.

"I think we're very close to bottom of the cycle with fixed rates," he said.

"There's certainly been some great pricing out there by some of the majors on fixed rates for two or three terms, we've seen anything from 4.79 per cent to 4.99 per cent, they are at all-time record lows.

"So there's all indications we're near the bottom of the rate cycle for fixed rates."

Mortgage Choice spokeswoman Belinda Williamson said they had seen as easing of customers fixing loans in the first quarter of 2013 compared to the March quarter last year.

The average percentage of fixed rate loans over the March quarter was 20.78 per cent of new loan approvals, she said.

This compared to 22.67 per cent during the same period in 2012.Ms Williamson said many customers could be holding off on fixing their loans in the hope rates would fall further.

Canstar analyst Mitchell Watson said a lower interest rate could save a home loan customers thousands of dollars across the term of their loan.

"Depending on the size of your mortgage, a one per cent difference in interest rate can equate to several thousand dollars variation in interest costs per annum," he said.

"Variable interest loans tend to be more popular in Australia but those who are currently shopping for a new mortgage might do well to consider locking in."

View the original article here

Big Four tipped to start rates war

AN unprecedented out-of-cycle interest rate cut may still be on the cards, even if the Reserve Bank keeps the official cash rate on hold, as expected, today.

News Limited's shadow Reserve Bank has voted to keep the cash rate on ice today, but three members think at least one major bank will slash its standard variable rate by five basis points anyway.

Research fellow at the Centre for Independent Studies, Stephen Kirchner, is tipping a five-basis point cut by one of the Big Four will spark a discounting war.

"I think there is scope for further out-of-cycle cuts in at least some lending rates, if not the standard variable rate," Dr Kirchner said.

However, any out-of-cycle cut would be taken into account when the Reserve Bank next came to consider cuts.

"This just lessens the prospects for cuts in the official rate," he said.

Fellow shadow board member and Airport Economist Tim Harcourt also expects an out-of-cycle cut. "If the RBA leaves rates unchanged, I think at least one of the Big Four banks will try to get first-mover advantage and cut mortgage rates by five basis points or so," he said.

Managing director of Market Economics, Stephen Koukoulas, has also argued lower funding costs will open the door to voluntary cuts.

Bank of America Merrill Lynch chief economist Saul Eslake said that at the very least, home borrowers could expect to pocket any further rate cut in full.

In addition, "the banks appear to have been more willing to 'discount' their mortgage rates in order to capturebusiness in recent months," Mr Eslake said.

A respected banking analyst with brokerage CSLA, Brian Johnson, said the chances of an out-of-cycle cut this month were "low" given higher payouts on term deposits and a likely rise in short-term wholesale funding costs if it became apparent the Reserve's rate cutting cycle was over. "The most favourable dynamic right now is that the 90-day bank bill, which most bank funding is swapped to, is below the Reserve Bank's 3 per cent cash rate. That's extremely favourable now but it could reverse in a heart beat".

However, politics could come into play. "I think it's highly unlikely in an election year that you'll see net interest margins expand." So if funding costs began to ease significantly, out of cycle rate cuts could be on the cards. "If things do really improve, we should expect banks to pass that on to consumers."

A spokeswoman for loan comparison website Rate City, Michelle Hutchison, said an out-of-cycle interest rate cut was "more likely than not" and would come after four small lenders cut their rates voluntarily last week. "We have never seen variable home loan rates fall out of cycle. We have seen them increase but we haven't seen them drop," she said.

The Shadow RBA is split on the future for the official cash rate.

Two members, HSBC Australia's chief economist Paul Bloxham and Eureka Report's Adam Carr, are tipping rate hikes within the year.

According to Mr Carr: "Things globallyaren't anywhere nears as bad as the Reserve Bank board had thought and so I think they'll be hard pressed tojustifyfurthercuts."

Mr Bloxham said there had been was more evidence of recovery in the non-mining parts of the economy. "This month brought further signs that already low interest rates are getting some traction: consumer sentiment bounced, the housing market improved and the Australian share market rose to a new four and a half year high."

However, the majority of the board five out of nine expect further rate cuts this year will be needed to ensure a smooth transition after the end of the mining investment boom.

View the original article here

Bank is so rich it may cut rates

The Commonwealth Bank is making so much profit that it might be able to spare you a percentile or two. AFP PHOTO / Torsten BLACKWOOD Source: AFP

THE Commonwealth Bank has revealed it may slash lending rates even without the Reserve Bank moving, as it gallops towards the biggest bank profit in Australian history.

CBA boss Ian Narev yesterday said there was no reason for Australians to hate the bank, but he understood that many homeowners struggling with rising bills would regard as "excessive" the business' half-year cash profit of $3.78 billion.

This represents a profit of $20.7 million a day, $865,384 an hour or more than $14,000 a minute.

He admitted yesterday for the first time that the competitive nature of the Australian mortgage market, combined with falling funding costs, meant it was "conceivable' the big banks may cut lending rates even if the RBA keeps official rates on hold.

But banking analysts said that while out-of-cycle moves on standard variable mortgage rates were a "real possibility" it wouldn't happen for six to nine months at the earliest as the banks' cost of funds remain too high at the moment - even after the recent fall in pricing on global wholesale markets.

After announcing the super-charged interim result boosted by strong deposit growth and an improving economic backdrop, Mr Narev said it was legitimate for home owners and depositors to question the debate around mortgage rates and that it wasn't likely to go away anytime soon.

"Our job, unfortunately, is we've got to keep focused on the right balance between mortgage customers needs, deposit holders needs and the needs of 800,000 Australians who own the shares directly and millions more through funds and realise at any given time one or more of those group of stakeholders are going to hate us," he said.

"But it is impossible to please all those people at one-time and achieving the right balance is very hard."

The improving global outlook has seen most of the major banks lower their fixed rates in recent weeks a bid to attract borrowers.

ANZ yesterday lowered their 1-year fixed rate to 5.19 per cent and 2-year rate to 4.99 per cent.

And National Australia Bank quickly followed suit dropping their 1-year fixed rate to 5.09 per cent - the lowest level among the Big Four in the market place - and the 2-year rate to 4.99 per cent.

Morningstar banking analyst David Ellis said it was a "cracker result" that put CBA easily on track to record a full-year monster profit of $7.55 billion.

But he warned that any potential out of cycle SVR moves wouldn't occur in the near term.

"There was a tick against almost all parts of the business," Mr Ellis said.

"But before we get an out-of-cycle lending rate cut we will need to see a fall in deposit rates and a drop in funding costs which is unlikely to occur until at least the second-half of this year or the start of 2014."

Investors buoyed by the strong bank result and increase in the dividend payments pushed CBA share price to an all-time high helping the benchmark ASX 200 index above the key 5000 point threshold.

The stock market yesterday reached 5013 points - its highest level since September 2008 - having risen 25 per cent since June last year.

The outlook was also boosted by growing signs consumer sentiment is turning with the most recent survey showing the biggest jump in household sentiment since September 2011.

Mr Narev was upbeat the recent run of RBA rate cuts was starting to work and that confidence in the economy was on the rise.

"If the current stability continues, we believe it will translate into a slow but steady rebuilding of consumer and business confidence in Australia," he said.

"But of course risks remain in the economy, and as a major financial institution we must remain cautious."

View the original article here