Are fixed interest rates on the up in Australia?

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AutoInsuranceMM.Info – Low income insurance – Are fixed interest rates on the up in Australia?

The Reserve Bank of Australia (RBA) hasn’t adjusted the official cash rate for two years and many analysts don’t see that changing anytime soon. But despite a stationary cash rate setting, fixed rate home loans have been on the move. So, what are the current rates on fixed home loans, and are they moving up or down? Canstar investigates.

Over the past few months, lenders have lifted and cut home loan rates, regardless of the RBA’s decision to keep the cash rate at a record low of 1.5% since August 2016. Variable rate home loan hikes have, on average, ranged from 0.03 to 0.11 percentage points in July and August from lenders looking to cover the increasing cost of wholesale funding. On the other hand, fixed rate loans have, on average, been cut from 0.05 to 0.11 percentage points as some lenders focus on attracting more customers.

Canstar data show there are currently fixed rates as low as 3.54% for owner occupiers making principal and interest repayments and fixing for one year. Investors are seeing rates as low as 3.79% for those paying principal and interest on a two-year fixed loan, while those eligible for an interest-only loan could fix for three years as low as 3.89%.

Current fixed home loan interest rates

The table below shows the minimum, maximum and average interest rates on Canstar’s database for owner occupier fixed rate home loans at the time of writing.

Owner Occupier P&I Home Loan Market Snapshot (28/08/2018)
  1 Year Fixed 2 Year Fixed 3 Year Fixed 4 Year Fixed 5 Year Fixed
Average 4.07% 4.03% 4.09% 4.47% 4.54%
Min 3.54% 3.64% 3.69% 3.92% 4.08%
Max 5.14% 4.95% 5.05% 5.09% 5.09%
Source: www.canstar.com.au. Based on owner occupier loans available for a loan of $400,000, 80%LVR and principal and interest repayments.

The following table shows the minimum, maximum and average interest rates on Canstar’s database for investment fixed rate home loans at the time of writing.

Investor P&I Home Loan Market Snapshot (28/08/2018)
  1 Year Fixed 2 Year Fixed 3 Year Fixed 4 Year Fixed 5 Year Fixed
Average 4.60% 4.99% 4.39% 4.31% 4.39%
Min 3.88% 3.79% 3.84% 3.89% 3.89%
Max 5.66% 6.38% 5.17% 5.25% 5.35%
Source: www.canstar.com.au. Based on investor loans available for a loan of $400,000, 80%LVR and principal and interest repayments.

Are fixed interest rates going up in Australia?

Historical data from the past 12 months show average fixed rate home loans have decreased. The below Canstar data compares average fixed rates in August 2017 to the same time this year.

Fixed Rate Movements – 2017 vs 2018
  2017 2018 Average Change
1 Year Fixed 4.11% 4.08% -0.03%
2 Year Fixed 4.07% 4.02% -0.05%
3 Year Fixed 4.13% 4.10% -0.03%
4 Year Fixed 4.49% 4.46% -0.03%
5 Year Fixed 4.55% 4.53% -0.02%
Source: www.canstar.com.au. Based on owner occupier loans available for a loan of $400,000, 80%LVR and principal and interest repayments. Rates based on loans available as of 28/08/2017 and 28/08/2018.

As you can see, the reduced interest rate movements are minor year-on-year, with two-year fixed home loans leading cuts; down 0.05 percentage points.

When looking at movements over the past few months, the table below shows the biggest reductions have been to two and three-year fixed home loans on average, while five-year fixed loans edged higher.

Fixed Rate Movements Over the Last 2 Months
Average Rate 28/06/2018 Average Rate 28/08/2018 Number of Rate Moves Average Change
1 Year Fixed 4.08% 4.07% 9 -0.09%
2 Year Fixed 4.05% 4.03% 17 -0.11%
3 Year Fixed 4.11% 4.09% 17 -0.11%
4 Year Fixed 4.48% 4.47% 4 -0.05%
5 Year Fixed 4.54% 4.54% 5 0.01%
Source: www.canstar.com.au. Based on owner occupier loans available for a loan of $400,000, 80%LVR and principal and interest repayments. Rates based on loans available as of 28/06/2018 and 28/08/2018.

After analysing 1,848 products from 87 home loan providers, Canstar has announced the winners of the 2018 Fixed Rate Home Loan Awards.

These Awards involved a sophisticated ratings methodology, unique to Canstar, which compared cost and features across a range of fixed rate home loans we rate for owner occupiers and investors to determine the products that provide outstanding value to customers. Canstar considered a range of lenders in these Awards, including banks, non-banks and customer-owned institutions such as mutual banks, credit unions and building societies.

The table below features a snapshot of 80% LVR fixed loans for first home buyers offered by our three award recipients, sorted by provider name (alphabetically). Please note this table is formulated based on a loan amount of $550,000 taken out in NSW, repaying both principal and interest.

Compare Home Loans with Canstar

The winners of our 2018 Fixed Rate Home Loan Award all offered competitively low interest rates compared to the market average for fixed rate loans. The winners are listed below in alphabetical order.

Freedom Lend – Non-Bank of the Year, Fixed Rate Home Loan

Freedom Lend was awarded Non-Bank of the Year in the 2018 Fixed Rate Home Loan Awards.

Canstar Research found Freedom Lend led the pack in the five-year fixed loan profiles analysed for owner occupiers and investors in this category, and performed strongly across the range of fixed loan terms considered.

Newcastle Permanent – Customer-Owned Institution of the Year, Fixed Rate Home Loan

Newcastle Permanent – Customer-Owned Institution of the Year, Fixed Rate Home Loan

Newcastle Permanent was awarded Customer-Owned Institution of the Year in this year’s Fixed Rate Home Loan Awards.

The lender was found to have performed strongly in terms of cost and features across residential and investment loans and was a stand out when it came to two-year fixed investment loans.

UBank – Bank of the Year, Fixed Rate Home Loan

UBank – Bank of the Year, Fixed Rate Home Loan

UBank was awarded Bank of the Year in the 2018 Fixed Rate Home Loan Awards.

Canstar Research found UBank led the market for bank lenders in one-year fixed loans for owner occupiers and investors, as well three-year fixed residential home loans and five-year fixed investment loans.

For more information about the 2018 Fixed Rate Home Loan Awards and how they are calculated, please view the ratings methodology:

View methodology