PHOTO: Reserve Bank of Australia. FILE
In a surprising move, Macquarie Bank has slashed its fixed interest rates just weeks before the Reserve Bank of Australia (RBA) meets on February 18 to decide on the official cash rate. This preemptive action could trigger a ripple effect across the Australian mortgage market as other lenders reconsider their rates.
Macquarie reduced its one-year fixed rate from 5.85% to 5.69%, while its two-year and three-year fixed rates dropped from 5.69% to 5.55%. Longer-term fixed rates for four and five years remain steady at 5.69%.
Domino Effect in Fixed Rates Likely
According to Canstar data insights director Sally Tindall, Macquarie’s move might pressure other lenders to lower their fixed rates to remain competitive.
“The fixed-rate market has been relatively quiet over the summer, with more lenders hiking rates in December than cutting,” she explained. “Macquarie’s decision could push competitors to reevaluate their fixed-rate offerings ahead of the RBA’s February meeting.”
However, Tindall cautioned borrowers against expecting rapid or widespread cuts.
“While at least one cash rate cut this year is highly likely, borrowers shouldn’t bank on a string of reductions in quick succession.”
Competitive Fixed Rates Available Now
The market is already showing a range of competitive fixed rates from other lenders, such as:
- 1-year fixed rate: Police Bank at 5.59%.
- 2-year fixed rate: Easy Street, Bank Vic, and Community First Bank at 5.49%.
- 3-year fixed rate: SWS Bank at 4.99%.
Macquarie’s fixed rates remain lower than those offered by the Big Four Banks:
- Commonwealth Bank: 6.39% (1-year term).
- NAB: 6.29%.
- ANZ: 6.14%.
- Westpac: 6.09%.
RBA Rate Cuts Predicted for 2025
The cash rate currently sits at 4.35%, its highest level in 12 years after 13 consecutive hikes in 2022 and 2023. These aggressive increases were implemented to counter rising inflation, but the market anticipates a shift in 2025.
Economists at major banks are forecasting cuts:
- Westpac: A 25-basis-point cut by May, reducing the cash rate to 4.1%.
- NAB, ANZ, and Commonwealth Bank: Expect similar cuts, with CBA predicting an earlier reduction in February.
“Our base case is for the RBA to begin normalising the cash rate in February 2025, with a 25-basis-point cut,” said Gareth Aird, head of Australian economics at CBA.
The RBA’s decisions will likely hinge on broader economic conditions, inflation, and global economic trends.
The RBA’s 13 hikes in 2022 and 2023 were the most aggressive since the late 1980s
What This Means for Borrowers
With 70% of Australians on variable rates and only 2.6% relying solely on fixed rates, the recent shifts in fixed-rate offerings provide opportunities for borrowers to lock in lower rates ahead of potential RBA cuts. However, experts warn borrowers to remain cautious and weigh the risks of fixing their mortgage rates during an uncertain economic period.
SOURCE: THE DAILY MAIL