Westpac has cut its fixed-rate mortgages a week ahead of the Reserve Bank of Australia (RBA) meeting, now reaching the lowest fixed rate of the “big four” banks.
Westpac has cut its fixed-rate mortgages across its one- and two-year loan terms, following NAB’s initiative, which slashed all its fixed-rate mortgages in the first week of February.
Canstar’s rate tracking showed that Westpac reduced its rate by 0.40 percentage points for owner-occupier loans with a one-year term, and by 0.30 percentage points for loans with a two-year term.
Westpac’s lowest fixed rate now reaches 5.59 per cent and is available for owner-occupiers on a two-year term, paying principal and interest with a deposit of at least 30 per cent.
Australia’s second-largest lender also reduced its fixed investor loan rate by 0.35 percentage points.
Westpac’s move follows NAB’s initiative to cut fixed rates earlier in February and Macquarie Bank in mid-January.
As a result, Westpac now has the lowest 1-, 2-, 4- and 5-year fixed rates among the big four banks.
For a one-year term based on owner-occupied loans with principal and interest repayments, Westpac now has the lowest rate at 5.69 per cent, while CBA has the highest rate at 6.39 per cent.
According to Canstar data, CBA has the highest fixed interest rates of the big four banks across all fixed-term loans.
Westpac’s one-year fixed rate is now one of the lowest rates in the market, alongside Macquarie Bank, at 5.69 per cent.
However, Macquarie Bank still offers lower rates on a two- or three-year fixed rate at 5.55 per cent for owner-occupiers paying principal and interest with a deposit of at least 30 per cent.
The lowest fixed rates in the market on a fixed two-year term for owner-occupiers are at BankVic, Community First and Easy Street, with 5.49 per cent, while Westpac sits at 5.59 per cent.
Canstar data insights director, Sally Tindall, said that despite Westpac having the lowest fixed loan of the major banks, borrowers will still be waiting for a rate cut at the RBA meeting.
“CBA’s half-yearly results, released today, illustrate just how unpopular fixing is. Only 1 per cent of new mortgages taken out with the bank in the last quarter of 2024 opted for a fixed rate, in dollar terms,” Tindall said
“After waiting well over a year for cash rate cuts to come, it’s hard to see many borrowers tossing this opportunity in.”
“This, alongside an easing in the cost of wholesale funding, is now pushing some banks to review their fixed rates, with more likely to follow,” Tindall said.
The next RBA meeting is set for 18 February 2025, with Tindall forecasting a possible rate cut “fast approaching, potentially as soon as next Tuesday”.
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Dear Fellow Property Investor,
ANZ and the Commonwealth Bank are both forecasting a rate cut when the RBA next meets in February. The Reserve Bank says economic management remains a "balancing act".
ANZ has joined the Commonwealth Bank in predicting an interest rate cut in February, which could provide relief to mortgage holders following a sustained rate of 4.35 per cent.
The cash rate has stayed the same since November 2023, with Reserve Bank of Australia (RBA) governor Michele Bullock saying that taming inflation is a "balancing act"."
With inflation coming down and employment growing, we think we remain on the narrow path," she said after the central bank's December meeting.
So, what does the RBA consider when setting its cash rate target, and what do the 'big four' banks think lies ahead?
What are the banks predicting?
ANZ and CommBank are both forecasting a rate cut when the RBA next meets in February.
Westpac and NAB disagree and are predicting Australians will have to wait for the third RBA meeting in May before the cash rate target is changed.
The banks also differ when it comes to estimating how many cuts will occur throughout 2025.
ANZ is the most conservative and is anticipating two cuts this year, while CBA and Westpac both speculate four will occur.
NAB is projecting five rate cuts.
Independent financial comparison site Canstar has estimated that a reduction in monthly repayments from one cut could be up to $92 on a $600,000 loan with 25 years remaining on the term.
How much could Australians save?
On Friday, Canstar released data calculating drops in mortgage repayments for each of the bank's predictions.
If five rate cuts are realised, the drop in monthly repayments could be as high as $441 per month for a borrower with a $600,000 loan and 25 years remaining.
If just two rate cuts occur, the same borrower will save $182 each month.NAB is expecting the greatest relief for borrowers with five cuts compared to ANZ’s forecast for only two cuts.
A rate cut is increasingly likely this February, but Canstar data insights director Sally Tindall said to "prepare for any possibility".
"The big question is just how many rate cuts the RBA will end up handing out. If you’ve got a mortgage, be prepared for every possibility," she said.
"A rate cut in February is increasingly likely, however, with over five weeks to go until the next Board meeting and the RBA firmly focused on incoming data, this could change."
There are several measures that influence RBA decision-making, including inflation and unemployment.
Looking to inflation and employment rates
ANZ's new prediction of a February rate cut follows the release of November's consumer price index (CPI) data on Wednesday.
The Australian Bureau of Statistics reported CPI at 2.3 per cent in the 12 months leading to November, within the RBA's target of 2 to 3 per cent.
ABS head of price statistics Michelle Marquardt said government electricity rebates had a large impact on CPI.
"In some states and territories, households received two rebate payments in October in lieu of not receiving a payment in July. From November, most households have received one payment," she said on Wednesday.
"As a result, electricity prices fell 21.5 per cent in the 12 months to November, compared to a fall of 35.6 per cent to October."
Meanwhile, underlying inflation was at 3.2 per cent in November, down from 3.5 per cent in October.
The RBA's target for this form of inflation is 2 to 3 per cent. Tindall said analysts would also be looking at soon-to-be-released employment data.
"All eyes will be on next week’s ABS Labour Force data and the quarterly CPI results released at the end of the month," she said.
"If core inflation continues along the same trajectory as we saw in the more volatile monthly dataset, then we could well see a rate cut."
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Do you have a game plan for 2025?
Or will you watch savvy, educated, market-ready investors snap up all the bargains at the bottom of the Melbourne property cycle (which, in my opinion, already bottomed out in November 2022), again?
Or, will you join them?
So, what are you waiting for?
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New figures show inflation has slowed to a two-year low of 4.3% leading many to speculate there will be no need for further interest rate rises.
Australian Bureau of Statistics figures for November, show inflation is down from 4.9% in October. This is down from a peak of 8.4% in December 2022.
The Commonwealth Bank is tipping a drop in interest rates of nearly 1 percentage point by the second half of 2024.
CBA chief economist Stephen Halmarick, believes cuts will start in September 2024, dropping rates to 3.6%. He also predicts a further 75 basis point drop in 2025 when inflation sits within the Reserve Bank of Australia’s target of 2% to 3%. This, he says, will bring the cash rate back to 2.85%.
This is excellent news for all property investors as blue-chip inner-city properties located in desirable suburbs will become cash-flow neutral, and in some instances positive!
This aspect of cash-flow positive blue-chip properties will be further accelerated by the currentunprecedentedincreases inrental yieldsin‘Key Suburbs’around Melbourne and Sydney.Imagine, buying a townhouse in Carlton, Yaraville, or St. Kilda and its cash-flow positive from Day 1!
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Do you have a game plan for 2024?
Or will you watch savvy, educated, market-ready investors snap up all the bargains at the bottom of the Melbourne property cycle (which in my opinion by the way has already bottomed out in November 2022).
Or will you join them?
So, what are you waiting for?
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Overseas migration is frequently being called out as one of the primary factors influencing the housing market. In the face of high interest rates, low consumer sentiment and stretched housing affordability, values and rents continue to rise and vacancy rates plummet as net overseas migration has hit record highs.
National home values have increased 7.2% in the year-to-date, and rent values rose 6.0% in the same period. Heated discussions around migration are drawing more focus as housing affordability worsens. But there are many other factors driving values and the rental market, and long term, strategic migration policy should not be influenced by short-term volatility in migration and property markets. This report unpacks five key insights into migration and the housing market.
1. Housing tenure of migrants skew to rentals in the short term.
Fluctuations in overseas migration most immediately impact the rental market, rather than purchases. ABS data on permanent migrant settlement outcomes showed 60.8% of migrant arrivals in the five years to 2021 were renters. The incidence of home ownership was higher among permanent migrants who had been in the country for longer. As of 2021, this included 55.6% of arrivals between 2012 and 2016, and 70.6% of migrant arrivals before 2012 (figure 1).
Figure 1. Portion of permanent migrants renting or owning a dwelling, by year of arrival in Australia
For temporary migrants, 68.9% of temporary migrants 15 years and older were renters in 2021. This included 91.6% of temporary skilled visa holders, and 83.5% of student visa holders.
2. Part of the reason migration is so high right now is because it was temporarily restricted.
Australia closed its borders to all non-citizens and non-residents in late March 2020, and fully re-opened to vaccinated and non-vaccinated arrivals in July 2022. By March 2023, Australia’s annual population growth hit 2.17%, the highest rate since 2008. Net overseas migration, which is overseas arrivals minus departures[1], is currently at record highs annually, at 454,000 added to the population in the past 12 months. The pre-COVID decade average of annual net overseas migration is 217,000.
Figure 2a. Net overseas migration, rolling annual, Australia
Figure 2b.Overseas arrivals and departures, rolling annual, Australia
Assuming the average household size of 2.49 people per dwelling in January this year, the year to March would have seen demand for around 182,000 additional dwellings, in a year when around 175,000 dwellings were completed. That’s not to mention new household formation domestically, as young Australians move out, buy first homes, or start their own families. Domestic household formation has increased substantially in recent years amid a reduction in average household size.
The bottom line is that this phenomenon of record-high overseas migration numbers will add substantial pressure on rents increasing in the major capital cities as well as pressure on capital growth increases in the housing sector.
Let me ask you something…
Do you have a game plan for 2023 and 2024?
Or will you watch savvy, educated, market-ready investors snap up all the bargains at the bottom of the Melbourne property cycle (which in my opinion by the way has already bottomed out in November 2022).
Or will you join them?
So, what are you waiting for?
Reserve your place and join me and 55 like-minded property investors for the last Real Estate Investing Fast Track Weekend for 2023!
Interested in learning more about property investing in Australia? Please visit our main website InvestorsPrime.com.au for loads of free resources, articles, videos and more to help you on your investing journey.
