RBA holds but mortgage ‘rates keep tumbling’
Recordbreaking scenes are unfolding that could see "teaser rates" dip below the current 2.05 per cent lowest available home loan rate - even if the Reserve Bank continues to refuse to budge on its cash rate target.
The Reserve Bank of Australia's July monetary policy meeting saw the board decide to maintain its cash rate target at 0.25 per cent. Governor Philip Lowe said "the Board decided to maintain the current policy settings, including the targets for the cash rate and the yield on 3-year Australian Government bonds of 25 basis points".
He said the Australian economy was "experiencing the biggest contraction since the 1930s" with 800,000 people having lost their jobs since March and "many others retaining their job only because of government and other support programs".
RateCity.com.au data showed that despite the RBA holding at 0.25 per cent, home loan and deposit rates tumbled in the past month, with 19 lenders cutting at least one variable home loan rate, and 22 lenders cutting at least one fixed home loan rate.
Competition in the home loan market meant an average borrower taking out a $400,000 home loan at the lowest two-year fixed rate today, compared to a year ago, would pay $7,344 less in interest over the two-year fixed period, a RateCity statement said.
The market-leading two-year fixed home loan rate for new customers was Homestar Finance's 2.06 per cent - almost a full percentage point lower than the same time last year (-0.93 per cent). The lowest variable home loan was Freedom Lend's 2.17 per cent.
Sally Tindall, research director at RateCity.com.au, said "rates keep tumbling".
"It's been a record-busting month for mortgages as lenders leapfrog each other in a bid to offer the lowest-rate home loans," she said.
"With refinancing on the rise, lenders have to keep whittling down their rates if they want to be in contention for these borrowers."
International property buyer, finance and real estate expert Pete Wargent said while the chances of much lower mortgage rates were "pretty slim" - given three-year bond yield was already at RBA's target of 0.25 per cent - it was possible.
"Yes it's possible that we see lower one or two-year fixed rates, but borrowers should alway be mindful of what happens at the end of the fixed rate period," he warned.
"It's possible that banks offer shorter fixed term 'teaser rates' to win business, but I doubt we'll see much better deals than are available out there already".
Originally published as RBA holds but mortgage 'rates keep tumbling'