Navigating the world of home loans can be as tricky as a kangaroo on a tightrope, but for Australians with a mortgage, there’s some good news hopping your way. Westpac, one of the country’s leading financial institutions, has recently made a move that’s set to bring a collective sigh of relief from coast to coast.
For those of you who’ve been wrestling with the decision of whether to fix your mortgage rate or stick with a variable rate, Westpac’s announcement could be the nudge you need.
In a competitive twist that’s sure to shake up the banking sector, Westpac has taken the bold step of slashing its fixed mortgage rates. This strategic decision comes as the big banks brace themselves for a series of anticipated official rate cuts from the Reserve Bank of Australia (RBA) in 2025.
The bank has trimmed its one-year fixed rates by a substantial 40 basis points, bringing it down to 5.69 per cent. Meanwhile, the two-year fixed rates have been cut by 30 basis points to 5.59 per cent. These rates are looking particularly attractive when compared to Westpac’s introductory variable rate of 6.44 per cent.
It seems that Westpac, along with its fellow banking giants, is banking on the RBA to lower interest rates four times in 2025, which would bring the cash rate down to a level not seen since March 2023. This expectation of a softer monetary policy is driving the banks to vie for new customers by offering more appealing mortgage rates.
However, before you jump for joy and lock in a fixed rate, it’s worth considering the advice of Canstar data insights director Sally Tindall. She cautions that while fixed rates offer certainty, they also come with a catch.
‘While fixed rates can bring borrowers certainty, anyone who locks in their rate now will effectively be forfeiting their right to cash in on RBA cuts within their fixed rate term,’ she said.
Additionally, if you decide to break free from your fixed rate in late 2025 or early 2026 to take advantage of a falling variable rate, you could be hit with a hefty break fee.
The current landscape of fixed-rate mortgages is a far cry from their heyday in November 2021, when they accounted for 43 per cent of new loans. With the RBA cash rate at a record low back then, borrowers had little to lose. But times have changed, and so have the preferences of borrowers, with fixed-rate mortgages now holding a mere 2.6 per cent share of new loans by value as of September 2024.
As we look at the broader picture, it’s clear that the Australian property market has had its ups and downs, with most capital cities seeing value increases in 2024, barring Melbourne and Hobart. Affordability remains a thorn in the side for many, particularly in the more upscale suburbs of Sydney.
This news from Westpac serves as a reminder that the financial landscape is ever-changing, and staying informed is key. If you’re contemplating fixing your rate, it might be wise to hold off a little longer to see if rates drop further. And when you do decide to lock in, take the time to shop around for the most competitive deal.
We’d love to hear from you, our savvy YourLifeChoices readers. What’s your strategy in these fluctuating financial times? Share your experiences and insights in the comments below—your wisdom could be the guiding light for fellow Australians navigating the mortgage maze.
Also read: Your bank could be slashing interest rates soon! 3 of the Big Four banks say ‘It’s on’
