What This Means for Borrowers

Westpac has delivered good news for Australian homeowners by cutting its fixed mortgage rates ahead of the expected Reserve Bank of Australia (RBA) rate cut on February 18.

With Australia’s second-largest lender reducing its one-year fixed rate by 40 basis points to 5.69% and its two-year fixed rate by 30 basis points to 5.59%, the major banks are positioning themselves for what is expected to be several rate cuts throughout 2025.

Westpac’s new fixed rates are now significantly lower than its introductory variable rate of 6.44%, following a similar move by NAB last week.

Why Are Banks Cutting Fixed Rates Now?

According to Canstar’s Sally Tindall, the Big Four banks are already factoring in a February RBA rate cut and are aggressively competing for new borrowers.

“A cash rate cut is fast approaching, potentially as soon as next Tuesday,” she said.

The RBA is widely expected to reduce the cash rate from 4.35% to 3.35% by the end of 2025, marking the first time since March 2023 that interest rates have dropped to this level.

Westpac and Commonwealth Bank both predict four rate cuts this year, making variable rates increasingly attractive for borrowers.

Should You Fix Your Mortgage Rate Now?

Despite the new lower fixed rates, experts warn that locking in a fixed mortgage may mean missing out on future RBA rate cuts.

“Fixed rates can bring certainty, but borrowers who lock in now will forfeit the opportunity to benefit from future rate cuts,” Tindall explained.

With hefty break fees for those who exit a fixed loan early, many homeowners may choose to wait and take advantage of falling variable rates instead.

How Do Westpac’s Rates Compare?

Westpac now matches Macquarie Bank for the lowest one-year fixed rate at 5.69%, but smaller lenders like Bank Vic, Community First, and Easy Street offer two-year fixed rates as low as 5.49%.

For three-year fixed terms, Australian Mutual leads with 5.49%, while Newcastle Permanent offers the lowest four- and five-year rates at 5.59%.

Will Fixed Rates Drop Even Further?

With an RBA easing cycle on the horizon, banks are likely to continue adjusting their fixed mortgage rates to attract new customers.

“If you’re thinking about fixing your rate, consider waiting for them to fall even further and make sure to shop around for a competitive deal,” Tindall advised.

What This Means for the Property Market

Despite rising property values in 2024, high borrowing costs have kept many buyers on the sidelines.

• Investor lending fell by 4.5% in Q4 2024, suggesting investors may be waiting for lower rates before entering the market.
• New home loans dropped by 0.4% over the same period, as affordability concerns persisted, particularly in upmarket Sydney suburbs.

However, once rate cuts kick in, borrowing power is expected to increase, and demand for housing may rise again in 2025.

Secure the Best Mortgage Deal with Vantage Loans

With interest rate cuts just around the corner, now is the time to review your mortgage options. Whether you’re considering refinancing, locking in a fixed rate, or waiting for variable rates to fall further, Vantage Loans can help you navigate the best choices.

Contact us today at 1800 595 500, email support@vantagefinancial.com.au, or visit vantagefinancial.com.au