Focus Shifts To Fixed Mortgage Rates
Sydney Morning Herald
Saturday November 22, 1997
Home borrowers will reap the benefits of a new bout of competition in the fixed interest rate market, with the Commonwealth Bank and Westpac Banking Corporation this week lowering fixed mortgage rates.
With variable loans unlikely to move in the next few months, banks are taking advantage of low market interest rates, or bond yields, to lower fixed home loan rates.
The Commonwealth's offer pushes its five-year fixed mortgage rate to 7.25 per cent, well below the average 7.75 per cent.
"The initiative is likely to spark further competition as other lenders decide to match the CBA's offer in the run up to Christmas," said Market Faxts director, Mr Chris Gosselin.
"With mortgage rates at or close to the bottom of the current cycle, the option of fixing will be close to most homeowners' minds, and whilst fixed terms and rates reduce flexibility, this rate will rightfully tempt many to lock in."
The offer is available for applications made between November 15 and December 12 only. Existing Commonwealth Bank customers can switch to the rate at a discount switching fee of $150 plus break costs if applicable.
Westpac responded by cutting its four-year fixed rate by 0.2 per cent to 7.35 per cent, and its five-year rate to 7.60 per cent from 7.75 per cent. The National Australia Bank's Mr Haydn Park said Australia's biggest bank has discussed lowering fixed home lending rates but no changes were imminent.
NAB's current five-year rate is 7.60 per cent.
The number of fixed rate home loans has fallen to just 8 per cent of total home loans in recent months, as borrowers take advantage of falling variable rate loans.
But with official cash rates unlikely to fall much lower, there had been increased interest in fixed rate loans in recent weeks, lenders said.
"The market seems to be a little bit more interested in fixed rates though it hasn't been seen in volume yet," said Westapc's chief manager of relationship markets, Ms Sally Treeby.
The consensus among economists is that variable rate loans will not change significantly until the second half of next year. Many variable rate lenders, realising this, have added features to loans.
Wizard Financial Services Group, which previously competed chiefly on price, launched its first insurance-style home loan product last Wednesday.
© 1997 Sydney Morning Herald