Fixed-rate loans up to 1.5% below variable interest rates

By Terry Ryder, 24th August 2011

Lenders who expect official interest rates to fall are offering customers fixed-rate home loans significantly below variable rates, says mortgage broker Loan Market.

Some lenders are offering fixed rates as much as 1.5 percentage points below the bank's standard variable rate.

"We haven't seen a gap like this between fixed and variable rates in some time," says Loan Market chief operating officer Dean Rushton.

Since the RBA's last cash rate increase in November 2010, when it lifted official rates from 4.5% to 4.75%, the spread between fixed and variable rates has remained consistent - up until the past 12 weeks where the offerings on three-year fixed-rate products have dropped substantially below variable rates.

Rushton says Loan Market has had a 15% increase in inquiries about fixed-rate products.

"Around the last RBA rate movement, fixed-rate products were sitting about 0.5% higher than most variable rates, but now they are sitting up to 1.5% below the banks standard variable for a typical three-year fixed rate," Rushton says.

"During the initial months of the GFC, medium term (3-5 year) fixed rates stood almost 2% above variable rates, which highlights the extraordinary position the market is in right now."

Rushton says lenders are now forecasting that the RBA will lower official rates in response to the volatile international economic climate and sluggish domestic consumer confidence.

"Their position with fixed rate products widely supports this," he says.

ENDS

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