Interest Rates Drop, Experts Tipping More
Sun Herald
Sunday September 23, 2001
FIXED-TERM home loans are plunging amid predictions of more interest rate cuts.
By shopping around, borrowers can lock in their interest rate for five years without paying the usual premium attached to fixing.
But the news is grim for savers, with deposit and debenture rates tumbling.
Non-bank lender Mortgage House slashed its five-year rate to 6.55 per cent the same as the banks' standard variable rates.
Its three-year rate is substantially cheaper 6.15pc.
And experts tipped more rate cuts could be on the way, making more difficult the decision of whether to fix or not.
Aussie Home Loans managing director John Symond predicted interest rates would fall by up to 0.5pc ``by the end of the year". Symond said there could be a 0.25pc drop as early as next month.
Economists are predicting the Reserve Bank will cut interest rates at its regular board meeting next week, after global rate cuts of 0.5pc last week.
A 0.25pc drop would cut the monthly repayments on a typical Sydney mortgage of $150,000by $24.
Normally the best time to lock in interest rates is ``when everybody else thinks rates will fall", said Andrew Willink, managing director of interest rate monitoring group Cannex.
Fixing is already too late once the variable rate starts rising because banks and lenders anticipate the trend.
But Willink warned the latest offers were ``teasing" borrowers because there were likely to be more rate falls before the end of this year.
``In these times of great uncertainty that tease might not be enough to lure borrowers. The rates are attractive but there will be more falls in the near term," Willink added.
This ruled out fixing for five years, but the three-year rate would give borrowers an instant saving.
Willink said the better choices were to fix only part of the mortgage or apply a ``pretend fix" by making repayments at a higher rate.
Finance companies cut their debenture rates by up to 0.55pc. The top five-year debenture rate is now only 5.35pc, offeredby CBFC.
A rally in the bond market is also anticipating more rate cuts next month.
© 2001 Sun Herald
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