The Reserve Bank's cash rate is now at an all-time low, and that's caused a range of home loans to smash the 3 per cent interest rate barrier.
The RBA cut a total of 50 basis points over June and July, to now have Australia's cash rate sitting at an incredible 1 per cent.
While none of the big banks have passed on the entire cut to consumers, comparison site InfoChoice now lists 22 three-year fixed rate products from independent lenders with rates under 3 per cent per annum.
And there are 4 four-year fixed rate home loans for owner-occupiers with rates under 3 per cent.
"It really is amazing to think that a young couple buying their first home can lock in these extraordinary low rates for up to four years, until mid-2023," said InfoChoice chief Vadim Taube.
"And for anyone with a home loan around 4 or 5 per cent, the incentives to compare and refinance to a cheaper rate are now all but irresistible."
The lowest rates listed on InfoChoice in each category are (comparison rate based on $150,000 loan over 25 years):
Variable rate: 2.89% (comparison rate 2.89%) from Reduce Home Loan’s Low Rider Variable loan.
12-month fixed rate: 2.79% (comparison 4.17%) from Greater Bank’s 12 month Fixed Home Loan.
3-year fixed: 2.79% (comparison 3.04%) from Reduce Home Loans Home Owners Dream 3 Year Fixed
4-year fixed: 2.94% (comparison 3.76%) from St George Bank and Bank of Melbourne’s Owner Occupier P&I with Advantage Package (LVR<60%)
What will the Reserve Bank do this month?
The market is pricing in a 13 per cent chance of another RBA rate cut on Tuesday.
"We think the RBA will resist further rate cuts as long as possible - to wait for more evidence of the effect of previous cuts in June and July before moving again," Taube said.
"However, the RBA has been very clear with [RBA governor Philip Lowe's] messaging that more rate cuts will come if necessary."
Most Australian home loan borrowers are resisting fixed rates and are staying with variable rates, according to Taube.
"So Aussies are listening to the governor of the Reserve Bank and they expect rates to stay low or go even lower."
Fixed rates are a punt. The bank is making a prediction about where rates are headed and a customer considering fixing their rate has to decide whether the lender is correct or incorrect.
But no one has a crystal ball. Not even the banks.
Some experts recommend only fixing a rate when the borrower needs absolute certainty in repayments.
Independent Mortgage Planners managing director Craig Morgan said earlier this year investors may want this certainty to match their rental income to their outgoing costs, while owner-occupiers might have major life events coming, such as having children.
"They've done their budgets saying, 'We can afford our current mortgage; but we think we'd be stretched if it went up much'."
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