Newspaper article The Daily Mercury (Mackay, Australia)

Rates Down; Banks Start Lowering Three Year Fixed Mortgage Rates, Ahead of Tuesday's RBA Decision

Newspaper article The Daily Mercury (Mackay, Australia)

Rates Down; Banks Start Lowering Three Year Fixed Mortgage Rates, Ahead of Tuesday's RBA Decision

Article excerpt

A STRING of banks has lowered costs on fixed rate mortgages in recent days, while the dollar has slumped against the greenback, in a sign that suggests lower interest rates could be on the cards.

Citibank cut its three year fixed rate mortgage by 33 basis points to 6.99% effective today, according to financial product comparison site RateCity. ANZ Bank trimmed five basis points from its three year fixed mortgage on Saturday, taking it to 7.19%.

An average, the three year fixed rate is now at 7.35%, only five basis points above the average standard variable rate of 7.30% offered by the banks, RateCity said.

aWe haven't seen the gap between average three year fixed rates and standard variable rates this tight for at least the past two years,a CEO Damian Smith said.

Three year mortgage rates, linked to bond yields, often lead the official cash rate movements because the market is trying to guess where the official rate will move.

Although fixed rate mortgages have been easing slightly for some time, it was economists at Westpac who sped up calls for lower rates. The bank stunned the market on Friday by predicting that the Reserve Bank would lop 100 basis points from its official cash rate, starting in December, as the economy grapples with slower growth, cautious consumers and further fallout from the European debt crisis.

Such a move would put the interest rate at 3.75% sometime in 2013, from the 4.75% level it has remained at since November.

Westpac chief economist Dr Bill Evans said the catalyst for the first move was alikely to be further adverse developments in Europe and their knock-on effects on global financial marketsa. …

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