Sometimes opportunities are fleeting, with cheap four and five-year fixed home loan rates now falling into that category.
While it is still possible to get some very cheap two and three-year deals, the door has closed for the big four banks offering longer fixed rates for under 2%.
Even among the smaller lenders those deals are fast disappearing as the focus changes to two and three-year rates, which have now taken on the mantle of the cheapest around.
Floating rates coming down
Floating rate loans have also come down in price, tempting borrowers and refinancers with some of the very cheapest rates now falling into what used to be fixed rate only territory of around 2.3%.
The changes come despite there being no change to the Reserve Bank’s tiny 0.1% cash rate but instead reflect changes in what is happening in money markets as trader’s price in interest rate rises as the economy continues to recover strongly.
That means that longer term fixed rates are increasing even as the shorter-term loans continue to offer very low rates.
Variable rates are also lower because they offer the upside protection of being able to be increased as circumstances change.
Three-year fixed loans could be the next to rise
It is not too difficult to see where this is heading, with three-year fixed loans likely to be the next category to start rising as we travel further into this year.
Some pundits are predicting rises in the three-year rate as soon as the second half.
Macquarie Bank is a good example of this effect, having raised the rate on its four and five-year fixed loans by up to 0.30% for owner occupiers and investors while at the same time reducing its variable rates for owner occupiers and investors by up to 0.40%.
Variable loans the lowest rates ever
According to comparison website Mozo, average variable principal and interest rates for owner occupiers are now around 3.26%, rising to 3.66% for investors – the lowest points since they began tracking them in 2015.
Two and three-year fixed loans remain very popular with borrowers and that trend is likely to increase now that cheap four and five-year fixed rates have effectively left the station.
Floating rate loans are also proving popular because they have come down so much and can be used without the hassle of having to refinance a few years down the track, even though they obviously come with the disadvantage of being susceptible to rate rises along the way.
Banks mortgage departments are flat out
The changing composition of home loan offers comes as virtually all financial institutions are breaking records in writing new loans as the property boom and refinancing push up volumes.
The latest Australian Bureau of Statistics (ABS) figures showed that $22.6 billion worth of home loans were refinanced during March, a 21% increase on the February refinancing figure of $18.8 billion.
Of that total $15.1 billion came from owner occupiers and $7.5 billion came from investors – both up substantially on previous months as customers refinance and new loans are taken out.
The ABS figures also showed that new home loan commitments reached over $30 billion in March, a new record.