Home loan customers benefit from higher borrowing power

Jun 4, 2019

Key Insights

  • The continued decline in fixed interest rates increases the affordability of loans for new borrowers whilst providing refinancing opportunities for existing ones.
  • Falling rates have emerged as a result of a drop in BBSW and legislation changes by APRA.
  • Changes to APRA legislations have increased borrower capacity by removing minimum floor rate for loan accessibility.
  • The borrowing power of customers could be further strengthened by an anticipated RBA rate cut this June.
  • The lowest fixed rate on offer at the moment is 3.49% by Suncorp on 1- and 3-year fixed rate product.

Fixed rates continue to decline to provide refinancing opportunities.

Major banks across Australia have continued to slash mortgage rates for borrowers with a significant drop in fixed and variable interest rates over the past months. According to financial comparison website RateCity, 50 different lenders have cut their fixed interest over the past two months in order to stay competitive with other major banks. Variables rates have remained relatively stable with a smaller margin drop in comparison to fixed. However, the overall decline in rates has increased the borrowing capacity of consumers in the market whilst also offering refinancing opportunities for existing borrowers.

Exhibit 1: Fixed rates offered by major banks have continued to decline whilst variable rates remain stable.  (Data as of April 2019)

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