More room for fixed rates to fall and better deals outside major banks: Mozo

Reductions in fixed mortgage rates have not kept pace with variable-rate cuts since the RBA started cutting the cash rate in November last year and have further to fall, according to analysis by mortgage comparison website Mozo.com.au.

Its research reveals that the major banks have cut their standard variable rates by an average of 116 basis points between November 2011 and October 2012 but average one-year fixed rates have only fallen by 96 basis points and average three-year fixed by 94 basis points.

As the Greater Building Society announced its one-year fixed rate would fall below 5% from tomorrow (4.99%), Mozo's Peter Marshall told Property Observer fixed rates “still have some way to fall”.

“Fixed rates have fallen swiftly in the last few months in particular, but they have still not fallen as much as variable since November," says Marshall, product data manager at Mozo.

“And most analysts agree there are more cuts coming through from the RBA,” he says.

Marshall expects lenders to continue to cut fixed rates over the next week or so.

He says it currently makes “very good sense" to consider splitting your loan between fixed and variable products.

“Some lenders will do a sharper fixed rate if you only fix up to 50% of your loan."

He says currently, non-bank lender eMoney  is offering a three year fixed-rate of 5.25% but only if you fixed up to half the loan.

“It’s a really good strategy as you get some benefit if rates fall, but but no repayment shocks”

Marshall also says it pays to look around beyond the major banks.

On average the big four have cheaper fixed rates than other banks, mutuals and non-bank lenders, but when you drill down to individual lenders, the major banks don’t compete.

“There are plenty of other providers offering lower rates,” he says, providers borrowers are happy with a non-big brand lender.

“For borrowers wanting the security of a major lender, it’s worth looking at UBank, owned by NAB and the same goes for Bankwest, owned by Commonwealth Bank.

“You get the confidence of a major lender without having to pay for the privilege."