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Fixed rates back en vogue

By webmaster
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The recent reduction in fixed rate mortgages suggests Australia could be coming to the end of the upwards rate cycle.

In the last four weeks, four of the big five have slashed basis points from their fixed rate mortgages.

Yesterday, CBA announced it would cut more than 40 basis points off some of its owner occupied and investment home loan fixed rates.

According to AMP chief economist Shane Oliver, the recent fixed rate reduction reflects a decline in the longer term sale of bond yields.

“The cost of long term yields has come down, and as such, the banks are passing this reduction on to their customers,” he said.

Mr Oliver said he expects the RBA to hike rates one more time before the end of the year.

“Originally I had expected rates to hit 5 per cent by the end of the year, but we have now revised this forecast down to 4.75 per cent,” he said.

At present, lenders are offering some of the best deals on fixed interest rate home loans in recent years.

Loan Market national operations and risk manager Ivan Karamatic said the majors’ recent rate cuts had meant the fixed rate market had suddenly become highly competitive.

“Some fixed rate packages currently on offer are only slightly higher than some of the standard variable rates,” he said.

“In some instances the difference between a three year fixed rate and that of a standard variable is as little as 0.38 per cent.

“That’s only one or two RBA interest rate hikes away from mortgage holders being potentially better off with the fixed package.”

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