*Photo by **Joshua Willson** on **Unsplash*

**Amid strong expectations of further cash rate cuts and tentative signals of a property market rebound, Australia’s largest banks are among the many lenders tempting mortgage-holders to lock in their interest rates with some attractively low fixed-rates.**

In the past week, three of the big four (ANZ, Commonwealth Bank and Westpac) have slashed fixed-rate home loans by as much as 96 basis points, which is nearly four times the size of the Reserve Bank’s latest cash rate cut.

Why might they be doing this?

Well, with forecasts of more cash rate cuts on the horizon, you’d imagine banks would want to lock as many borrowers as they can to fixed rates – minimising the number of borrowers they’d be expected to pass on further cash rate cuts to.

But borrowers tempted to take out these freshly-cut fixed home loans should keep a few things in mind.

**One**, what might seem like a great fixed rate now may not look so good compared to the variable rates available in six month’s time – it’s not beyond the realm of possibility that by then there’ll be home loan rates on the market advertised at 2.50% p.a. or less.

**Two**, if you do take out a fixed loan then later decide to refinance to a variable rate because you’re sick of paying a fixed rate that’s much higher than the low variable rates that all your mates are enjoying, be prepared to face a pecuniary punishment. Refinancing to another loan before the end of the fixed term will see you slapped with a **break fee**, which can amount to thousands of dollars.

**Three**, taking out a fixed rate home loan can be akin to wagering with your lender over whether market interest rates are going up or down – if they go up, you win, if they go down, the lender wins. But the odds are usually stacked against you (the borrower), because in setting these fixed rates, lenders price in the likelihood of future rate movements, which they base on the research of in-house economists and expert market analysts. Do you really fancy your chances against these smarty-pants?

And finally, **four**, at the end of the fixed-rate period, don’t expect the bank to automatically switch your loan to one of its lowest variable rates. Chances are your loan will revert to the bank’s standard variable rate, which can be over 200 basis points higher than some of its lowest rates. At this stage, you may be desperate to refinance.

Of course, with all this in mind, if you’re someone who strongly values the certainty of knowing exactly what your rates and repayments will be over the next two to five years, then choosing a fixed rate is definitely worth considering.

In his best-selling book, *The Barefoot Investor,* author Scott Pape has this to say about taking out a fixed-rate home loan:

“The only reason you’d fix your rate is if you’re really struggling and you want the security of fixed repayments, but for everyone else it’s too much of a gamble.”

– Scott Pape in his book,The Barefoot Investor

Listed below are some of the latest fixed rate cuts the Savings.com.au team has observed from each of the big four banks and their subsidiaries.

*Note: P&I = Principal & Interest Repayments, IO = Interest Only Repayments*

### Fixed-rate home loans P&I

## ANZ fixed rate cuts

On Thursday 25 July, ANZ cut fixed rates by up to 96 basis points across owner-occupier and investment home loans with principal and interest or interest-only repayments:

**Owner occupier fixed rate cuts:**

- one-year P&I fixed rates have been cut by 81 bps to 3.43% p.a. (4.84% p.a. comp rate*)
- four-year P&I fixed rates have been cut by 96 bps to 3.68% p.a. (4.57% p.a. comp rate*)
- five-year P&I fixed rates have been cut by 46 bps to 3.68% p.a. (4.49% p.a. comp rate*)
- one-year IO fixed rates have been cut by 70 bps to 4.04% p.a. (4.90% p.a. comp rate*)
- four-year IO fixed rates have been cut by 85 bps to 4.29% p.a. (4.78% p.a. comp rate*)
- five-year IO fixed rates have been cut by 36 bps to 4.29% p.a. (4.75% p.a. comp rate*)

**Investment fixed rate cuts:**

- one-year P&I fixed rates have been cut by 60 bps to 3.84% p.a. (5.42% p.a. comp rate*)
- four-year P&I fixed rates have been cut by 85 bps to 4.09% p.a. (5.10% p.a. comp rate*)
- five-year P&I fixed rates have been cut by 25 bps to 4.09% p.a. (5.01% p.a. comp rate*)
- one-year IO fixed rates have been cut by 55 bps to 4.14% p.a. (5.45% p.a. comp rate*)
- four-year IO fixed rates have been cut by 75 bps to 4.39% p.a. (5.21% p.a. comp rate*)
- five-year IO fixed rates have been cut by 71 bps to 4.39% p.a. (5.14% p.a. comp rate*)

## Commonwealth bank fixed rate cuts

On Friday 26 July, the day after ANZ’s changes, Commonwealth Bank announced fixed rate cuts of up to 80 basis points. Just a few days before on 19 and 23 July, CommBank’s subsidiary Bankwest cut a range of fixed rates by up to 71 basis points.

**CommBank owner occupier fixed rate cuts:**

- two-year P&I fixed rates have been cut by 61 bps to 3.33% p.a. (4.78% p.a. comparison rate*)
- three-year P&I fixed rates have been cut by 51 bps to 3.43% p.a. (4.68% p.a. comparison rate*)
- five-year P&I fixed rates have been cut by 60 bps to 3.64% p.a. (4.54% p.a. comparison rate*)
- two-year IO fixed rates have been cut by 50 bps to 3.94% p.a. (4.89% p.a. comparison rate*)
- three-year IO fixed rates have been cut by 45 bps to 4.04% p.a. (4.83% p.a. comparison rate*)

**CommBank investment fixed rate cuts:**

- two-year P&I fixed rates have been cut by 30 bps to 3.74% p.a. (5.32% p.a. comparison rate*)
- three-year P&I fixed rates have been cut by 30 bps to 3.84% p.a. (5.20% p.a. comparison rate*)
- five-year P&I fixed rates have been cut by 50 bps to 4.04% p.a. (5.04% p.a. comparison rate*)
- two-year IO fixed rates have been cut by 30 bps to 4.04% p.a. (5.38% p.a. comparison rate*)
- three-year IO fixed rates have been cut by 20 bps to 4.14% p.a. (5.28% p.a. comparison rate*)
- five-year IO fixed rates have been cut by 80 bps to 4.34% p.a. (5.17% p.a. comparison rate*)

**Bankwest fixed rate cuts:**

- two-year owner occupier P&I fixed rates have been cut by 49 bps to 3.19% p.a. (4.04% p.a. comparison rate*)
- three-year owner occupier P&I fixed rates have been cut by 23 bps to 3.26% p.a. (4.02% p.a. comparison rate*)
- three-year investor P&I fixed rates have been cut by 20 bps to 3.68% p.a. (4.56% p.a. comparison rate*)
- three-year investor IO fixed rates have been cut by 71 bps to 3.99% p.a. (4.64% p.a. comparison rate*)

## Westpac fixed rate cuts

Westpac last cut its Westpac-branded fixed rate home loans on 10 July by up to 70 basis points, but on 22 July it also cut the fixed rates offered by its subsidiaries St George, Bank of Melbourne and BankSA.

**Westpac owner occupier fixed rate cuts:**

- two-year P&I fixed rates have been reduced by 61bps to 3.18% p.a. (4.00% p.a. comparison rate*)
- three-year P&I fixed rates have been reduced by 51bps to 3.28% p.a. (3.99% p.a. comparison rate*)
- two-year IO fixed rates have been reduced by 70bps to 3.79% p.a. (4.58% p.a. comparison rate*)
- three-year IO fixed rates have been reduced by 70bps to 3.89 % p.a. (4.56% p.a. comparison rate*)

**Westpac investor fixed rate cuts:**

- two-year P&I fixed rates have been reduced by 30bps to 3.59% p.a. (4.51% p.a. comparison rate*)
- three-year P&I fixed rates have been reduced by 30bps to 3.69% p.a. (4.48% p.a. comparison rate*)
- two-year IO fixed rates have been reduced by 26bps to 3.89% p.a. (4.77% p.a. comparison rate*)
- three-year IO fixed rates have been reduced by 30bps to 3.99% p.a. (4.75% p.a. comparison rate*)

**Bank of Melbourne fixed rate cuts (summary)**

- two and three-year owner-occupier P&I home loan cuts by 55 basis points to as low as 3.19% p.a. (4.71% p.a. comp rate*)
- two and three-year owner-occupier IO loans cut by 65 basis points to as low as 3.89% p.a. (5.31% p.a. comp rate*)
- two and three-year residential investment P&I loans cut by 25 basis points to as low as 3.69% p.a. (5.26% p.a. comp rate*)
- two and three-year residential investment IO loans cut by 35 basis points to as low as 3.99% p.a. (5.40% p.a. comp rate*)

**St George fixed rate cuts (summary)**

- two and three-year owner-occupier P&I home loans cut by 50 basis points to as low as 3.24% p.a. (4.73% p.a. comp rate*)
- two and three-year owner-occupier interest-only loans cut by 65 basis points to as low as 3.89% p.a. (5.32% p.a. comp rate*)
- two and three-year residential investment P&I loans cut by 25 basis points to as low as 3.69% p.a. (5.26% p.a. comp rate*)
- two and three-year residential investment interest-only loans cut by 35 basis points to as low as 3.99% p.a. (5.40% p.a. comp rate*)

**BankSA fixed rate cuts (summary)**

- two and three-year owner-occupier P&I home loans cut by 45 basis points to as low as 3.29% p.a. (4.81% p.a. comp rate*)
- two and three-year owner-occupier interest-only loans cut by 70 basis points to as low as 3.94% p.a. (5.40% p.a. comp rate*)
- two and three-year residential investment P&I loans cut by 30 basis points to as low as 3.74% p.a. (5.35% p.a. comp rate*)
- two and three-year residential investment interest-only loans cut by 40 basis points to as low as 4.04% p.a. (5.49% p.a. comp rate*)

## NAB Fixed Rate Cuts

National Australia Bank made a series of cuts to a range of fixed terms on 12 July by up to 60 basis points before cutting some fixed rates offered by its subsidiary UBank on 17 July.

**NAB owner occupier fixed rate cuts**

- two-year P&I fixed rates have been reduced by up to 40bps to as low as 3.19% p.a. (4.51% p.a. comp rate*), first home buyers could get a two-year fixed rate as low as 3.09%
- two-year IO fixed rates have been reduced by up to 50bps to as low as 3.79% p.a. (4.72% p.a. comp rate*)
- three-year P&I fixed rates have been reduced by up to 50bps to as low as 3.29% p.a. (4.45% p.a. comp rate*)
- three-year IO fixed rates have been reduced by up to 50bps to as low as 3.79% p.a. (4.63% p.a. comp rate*)
- four-year P&I fixed rates have been reduced by up to 55bps to as low as 3.59% p.a. (4.47% p.a. comp rate*)
- four-year IO fixed rates have been reduced by up to 60bps to as low as 4.09% p.a. (4.64% p.a. comp rate*)
- five-year P&I fixed rates have been reduced by up to 50bps to as low as 3.59% p.a. (4.42% p.a. comp rate*)
- five-year IO fixed rates have been reduced by up to 80bps to as low as 4.09% p.a. (4.59% p.a. comp rate*)

**NAB investor fixed rate cuts**

- two-year P&I fixed rates have been reduced by up to 30bps to as low as 3.59% p.a. (5.06% p.a. comp rate*)
- two-year IO fixed rates have been reduced by up to 30bps to as low as 3.79% p.a. (5.18% p.a. comp rate*)
- three-year P&I fixed rates have been reduced by up to 30bps to as low as 3.59% p.a. (4.95% p.a. comp rate*)
- three-year IO fixed rates have been reduced by up to 30bps to as low as 3.79% p.a. (5.05% p.a. comp rate*)
- four-year P&I fixed rates have been reduced by up to 50bps to as low as 3.89% p.a. (4.95% p.a. comp rate*)
- four-year IO fixed rates have been reduced by up to 60bps to as low as 3.99% p.a. (5.00% p.a. comp rate*)
- five-year P&I fixed rates have been reduced by up to 50bps to as low as 3.89% p.a. (4.88% p.a. comp rate*)
- five-year IO fixed rates have been reduced by up to 60bps to as low as 3.99% p.a. (4.90% p.a. comp rate*)

**UBank owner occupier fixed rate cuts**

- one- year IO home loans cut by 25 basis points to as low as 3.14% p.a. (4.06% p.a. comp rate*)
- three-year P&I home loans cut by 25 basis points to as low as 2.99% p.a. (3.63% p.a. comp rate*)
- three-year IO loans cut by 25 basis points to as low as 3.14% p.a. (3.67% p.a. comp rate*)
- five-year P&I home loans cut by 25 basis points to as low as 3.19% p.a. (3.59% p.a. comp rate*)
- five-year IO home loans cut by 25 basis points to as low as 3.34% p.a. (3.65% p.a. comp rate*)

**UBank investor fixed rate cuts**

- one-year P&I fixed rates cut by 25 basis points to as low as 3.14% p.a. (4.32% p.a. comp rate*)
- one-year IO fixed rates cut by 50 basis points to as low as 3.29% p.a. (4.33% p.a. comp rate*)
- three-year P&I fixed rates cut by 50 basis points to as low as 3.14% p.a. (4.03% p.a. comp rate*)
- three-year IO fixed rates cut by 50 basis points to as low as 3.29% p.a. (4.07% p.a. comp rate*).
- five-year P&I fixed rates cut by 25 basis points to as low as 3.49% p.a. (4.00% p.a. comp rate*)
- five-year IO fixed rates cut by 25 basis points to as low as 3.64% p.a. (4.06% p.a. comp rate*)

***Comparison rate** includes both the interest rate and the fees and charges relating to a loan, combined into a single percentage figure. The interest rate per annum is based on a loan credit of $150,000 and a loan term of 25 years.

**Disclaimers**

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

- The big four banks are: ANZ, CBA, NAB and Westpac
- The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2020. They are (in descending order): Credit Union Australia, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
- The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.
- If you click on a product link and you are referred to a Product or Service Provider’s web page, it is highly likely that a commercial relationship exists between that Product or Service Provider and Savings.com.au

Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site.

In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*******Comparison rate** is based on a loan of $150,000 over a term of 25 years. Please note the comparison rate only applies to the examples given. Different loan amounts and terms will result in different comparison rates. Costs such as redraw fees and costs savings, such as fee waivers, are not included in the comparison rate but may inﬂuence the cost of the loan.

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