Banks happily cutting rates as times change in mortgage space

Three-year fixed rates dropped by 0.32 per cent to 4.61 per cent, while one-year fixed rates decreased by 0.19 per cent to 4.55 per cent.

The average variable interest rate dropped by 0.26 per cent to 5.07 per cent.

Peter Arnold, banking analyst at RateCity, said those second-quarter rate cuts were followed by a third-quarter “frenzy” after the Reserve Bank cut rates by 25 basis points in February.

“Times have changed in the home loans space,” he said.

“Just a few years ago when the RBA moved, the default position of many banks was to spend days delaying an announcement, only holding some of the cut or rise back from borrowers to protect their margins.

“The February rate cut was another story, with many lenders racing to announce cuts on the day and some cutting above and beyond the RBA’s 0.25 per cent.”

Mr Arnold added that the short-term outlook for rates is low and may go lower, with another RBA cut expected this year.

“Looking further down the track however, it’s inevitable that rates will rise and it is imperative that borrowers keep a level head when taking on debt, particularly in cities which are on the back of a series of house price increases in the past two years,” Mr Arnold concluded.

[Related: Fixed-rate demand continues to fall]