July 7, 2015, Sydney: Despite the Reserve Bank’s decision to leave the cash rate unchanged at 2 percent today, lenders have continued to cut their fixed home loan rates out of cycle.

Fixed rates have fallen to a new record low of 3.30 percent fixed for one year. Longer-term fixed rates remain low too, with 3-year fixed rates starting at 3.99 percent.

Peter Arnold, financial analyst at RateCity, said there is a lot of competition in the home loan space, particularly among the shorter-term fixed home loans, and there are a two main reasons for this.

“First, the cost of funding has reduced making it cheaper now for the banks to borrow money and, second, there is an expectation of further slowdown in the economy and a feeling that rates will drop lower still,” he said.

“With these factors combined, we’ve seen the lenders able to get more aggressive in their marketing and offering these sharper deals.”

Moving from the current average standard variable rate of 4.83 percent to a 1 year fixed rate of 3.30 percent shaves 1.53 percentage points off the rate and $265 off the monthly repayment on a $300,000 home loan. While, switching to the lowest 3-year fixed rate of 3.99 percent would cut monthly repayments by $148.

But, to be eligible for most of the hottest deals, some action is required by the borrowers and many existing customers may not benefit, Arnold added.

“We’re not seeing much in the way of cuts to normal variable rates, so borrowers can’t just sit there and expect their repayments to come down. If you want a hot deal, you’ll need to take some action to get it,” he said.

“My tip is if your home loan rate starts with a 4 then get out there and find a better rate – 3.99 percent is a sharp rate and gives consumers a great amount of certainty over a long period of time and there are plenty of shorter term fixed rates and variable rates below that.

“What borrowers need to also understand is that you don’t have to fix 100 percent of your home loan – you can have a foot in both camps with a split home loan.”