Have fixed mortgage rates peaked?


Four months have now passed since the Reserve Bank's last rate increase in June. Understandably, as the months have gone on and the cash rate has remained steady at 4.10%, speculation about reaching a rate peak for the current cycle has grown.

It's a question that borrowers who have borne the brunt of significant repayment jumps over the past year and a half would likely love to know the answer to.

While the Reserve Bank itself isn't ruling out the need for further hikes, there are positive signs for homeowners with a mortgage, including the direction that some lenders have been moving their fixed home loan rates of late.

have interest rates peaked

After steady increases in recent months, the average 2, 3, 4 and 5-year fixed mortgage rates being tracked by financial comparison website Mozo all fell between September and October - a potential indicator that banks are anticipating lower rates in the near future.

Not all lenders have been cutting their fixed rates Mozo spokesperson Rachel Wastell says, but there have been enough changes to turn the trend downwards.

"With three of the four major banks holding the belief that the cash rate has peaked, we're seeing a number of cuts in the fixed rate home loan space, but there have also been some increases, with rate changes varying depending on the loan term and the type of borrower.

"AMP, ANZ, Greater Bank, and NAB have all recently cut fixed rates by up to 40 basis points, while HSBC, Hume Bank and Auswide Bank have increased some fixed rates by up to 70 basis points."

Is it worth getting a fixed rate now? 

Julian Finch, mortgage broker and founder of Finch Financial, has started to see this fixed rate shift himself. However, he says that home loans with variable rates are still largely offering up the sharper interest rates.

"In the last couple of months we've seen lenders start to review their fixed rates. So they're starting to come down a touch, but they're still more expensive than variable rights right now."

So given that variable are relatively competitive at present and that fixed rates could come down even further if the Reserve Bank continues to stay it's hand, is there any scenario in which a borrower would want to lock in right now?

For Finch, it ultimately come down to an individual's circumstances, but he says there are certain situations in which a fixed rate could be the right choice - especially for those who can't afford for the rates to go up any further.

"If a couple is about to have a baby and one of the parents is taking some time off work, then they might want to go 'Okay, well, for the next 12 months we're going to have one income instead of two, so we need to lock in our budget and know exactly what it's going to cost us.'

"Of course, if rates do end up going down during that time that would be frustrating, but if they were to go up then it could obviously cause them some pretty serious stress."

Which lenders have the lowest fixed rates? 

For borrowers who may be considering locking in their rate for a few years, Wastell says that the difference between offers from different lenders certainly makes it worthwhile comparing options.

"Despite the cuts, the lowest fixed rates from the Big Four still all start with 6, while more competitive loans from smaller lenders are still boasting fixed rates starting with 5."

Here's a look at the lowest fixed home loan rates currently available for owner occupiers across each term in Mozo's database.

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Tom Watson is a senior journalist at Money magazine, and one of the hosts of the Friends With Money podcast. He's previously worked as a journalist covering everything from property and consumer banking to financial technology. Tom has a Bachelor of Communication (Journalism) from the University of Technology, Sydney.