Investors are betting the Reserve Bank will keep the cash rate - a key influence on variable mortgage rates - at its current level of 2. 5 per cent for the next year.
JP Morgan chief economist Stephen Walters said the latest round of mortgage rate cuts could further lift the housing market, but he did not think the prices rises were a major concern for the central bank. ”The lower rates go, some of that exuberance in the housing market might increase a bit,” Mr Walters said.
Banks are cutting fixed rates in an attempt to pinch customers from their rivals, but also because of changes in money markets. In recent months a worsening in the global economic outlook has helped to lower long-term fixed interest rates for banks and their customers.
But despite the wave of cuts, Kirsty Lamont, director of interest rate comparison website Mozo, said she expected more reductions as smaller banks responded to the big four over the coming weeks. ”The big four have fired the opening salvo, but we would expect the smaller lenders to follow suit and either match or undercut the big banks,” she said.
Westpac lowered its three-year rate by 10 basis points to 4. 99 per cent, and its four-year rate by 50 basis points, also to 4. 99 per cent. ANZ also cut its four and five-year rate, though at 5. 49 per cent, these remain higher than most of its rivals.
Banks continue to cut fixed-rate mortgages as they fight to win new customers, with ANZ and Westpac the latest to reduce key interest rates to below 5 per cent.
Read more here: SMH