ANZ Bank has recently reduced its fixed-rate home loan offerings, now providing the most competitive rates among the Big Four banks in Australia. This strategic move follows their forecast that the Reserve Bank of Australia (RBA) will likely reduce the cash rate in the upcoming meeting, a prediction shared by Commonwealth Bank, Westpac, and NAB. The expectation for a rate cut aligns with the recent sluggish data observed in retail and building sectors.
According to Adam Boyton, ANZ’s head of Australian economics, the current economic climate suggests that a reduction in rates is now the “path of least regret”. Previously, ANZ anticipated the RBA would wait until at least August before making any cuts, pending more inflation data. However, recent trends in consumer spending and confidence have prompted a reassessment, leading to a predicted cut of 25 basis points at the RBA’s next meeting.
Boyton emphasised that the upcoming RBA meeting would be closely contested, indicating that the rate cut decision might not align precisely with market predictions. Post-July, ANZ plans to evaluate the rate easing trajectory but is currently foreseeing further cuts in August.
Each of the Big Four banks now estimates a 0.25 per cent decrease, which would bring the cash rate to 3.60 per cent. This cut would significantly reduce monthly repayments for homeowners. For example, a 0.25 per cent decrease would save approximately $90 monthly for a standard $600,000 loan with 25 years remaining. Additional cuts could further lower repayments.
In tandem with the rate cuts, ANZ has adjusted its fixed home loan rates down by as much as 0.35 per cent, with the lowest advertised fixed rate now at 5.19 per cent for a two-year loan tailored to owner-occupiers. This positions ANZ as the leading choice among the major banks for fixed-rate home loans.
Canstar’s data insights director, Sally Tindall, commented on ANZ’s competitive pricing strategy, noting that the bank is adapting to potential future cash rate reductions. Furthermore, she pointed out that with only 3 per cent of ANZ’s mortgage portfolio currently on fixed contracts, the bank might be looking to secure more clients through these lower fixed-rate options.
Despite ANZ’s competitive stance, it’s crucial to note that lower fixed rates are available from other lenders. Canstar’s analysis identified 13 lenders with fixed rates below 5 per cent, suggesting homeowners should explore these options rather than settling for a rate starting with a ‘5’ or ‘6’.
Financial experts also urge caution for those considering locking in fixed rates. Mozo personal finance expert Rachel Wastell highlighted that fixing a home loan could be risky in a declining rate environment, recommending a mixed approach with split loans—combining fixed and variable rates. This strategy provides a safety net, allowing borrowers to capitalise on potential savings without fully committing to a fixed rate.
The recent adjustments in fixed loan rates and the anticipated RBA cash rate cut reflect the evolving landscape of Australia’s mortgage market, presenting both challenges and opportunities for borrowers. As lenders adapt to economic signals, borrowers are encouraged to remain informed and consider their borrowing strategies carefully.
