Owner-occupier interest rates starting with a 2 could become the new norm, according to RateCity research director Sally Tindall. This week the Reserve Bank opted to make no changes to the official interest rate but is expected to drop the rate again later in the year.
“With two more rate cuts on the cards, we could see the lowest variable rate drop below 2.6%, potentially even below 2.5%,” Tindall says.
“Lenders will be hard-pressed to pass RBA cuts on in full, but rivalry in the home loan market will keep pushing rates down, even if it’s not by as much as the RBA would like.
“This pressure will force more banks to offer owner-occupier rates under 3%, especially for people with a decent amount of equity in their property.”
In the fixed rate space, 28 banks already have rates under 3%, with 77 lenders reducing fixed home loans in the past two months as banks price in future cuts. “Some of the sharpest rates are reserved for fixed customers, starting from 2.79% for one year, and 2.94% for five years,” Tindall says.