Mortgage rate war heats up

With Australia’s official cash rate crashing to just 0.25%, mortgage rates have also cratered to all-time lows:

Some smaller lenders have even lowered mortgage rates below 2% for the first time ever as competition intensifies:

Mortgage loan interest rates have plunged below the two per cent mark for the first time ever in Australia.

Experts believe a mortgage war is brewing after smaller lender Bank of Us dropped 1, 2 and 3 year fixed loans to 1.99 per cent – the lowest rates ever recorded.

Bank of Us is a Tasmanian-based lender and the deals on offer is only for Tasmanian residents…

Many lenders are already offering both fixed and variable rate deals in the low two per cent range but these could fall further in the coming months.

The Mortgage and Finance Association of Australia’s chief executive officer Mike Felton said it was a “tremendous” time for borrowers to snap up rock-bottom deals.

“It could result in more lenders following suit,” he said.

“It’s great for competition and borrowers have never had a better opportunity to refinance.”

While falling mortgage rates are great news for those already ‘in the market’, and should free up disposable income, don’t expect it to propel house prices higher.

At the same time as lenders are lowering mortgage rates for those with equity and good incomes, they are also tightening eligibility for new borrowers amid concerns around high unemployment and falling incomes (see this morning’s post).

Since dwelling values are set at the margin when properties change hands, restrictions on credit should necessarily shrink the pool of potential buyers (as well as the price they can pay), resulting in lower prices (other things equal).

Leith van Onselen

Comments

  1. thefatgeneralMEMBER

    They’re putting on the pressure – check out my comment re MyState:

    Very interesting announcement from MyState Bank yesterday. For those who don’t know, MyState is a small Tasmanian lender which merged with Rockhampton Building society. Used to be ~80% of its loan book was Tasmanian, with about 15% QLD and the rest broker introduced and spread around (predominatly via the Rockhampton broker network). New CEO gets hired (on 1m+ per year) who is ex broker network at Westpac and immediately ramps up broker introduced lending – specifically a huge number come in via Oxygen mortgage brokers (McGrath realestate’s brokerage arm) – I suspect majority secured via new apartment devlopments sold by McGrath. Fast forward and the slides on the debt issuance (pg 22) only 40% of the loan book is now Tasmanian – with ~20% NSW and VIC respectively. But look at the hardships! (page 29) even though Tas has 40% of the book, they’ve had one third less loans in hardship than NSW and only just below VIC – which has less than half the loans outstanding. You also look at the totals – 500m in loans have requested hardship – this is an organisation that only makes 30m a year. If even a third of these default (& a bunch of those are underwater) it’ll wipe everything out. Buyer beware.

  2. Next will be the neobanks such as Xinja and Volt to undercut and lower mortgage rates even further.

    The strayan government is just going to have to admit that this kung-flu really isn’t so much of a deal to close the whole country. And, it will need to just go ahead with opening up and gradually letting it run it’s course through the population. It’s inevitable. There’s no other solution for Australia. The rest of the world will be achieving herd immunity well in advance and Australia will be sitting there with its thumb up its b um with news reports screaming crisis when 3 new cases appear and everyone runs to buy all the TP off the shelves.

    • Jumping jack flash

      ” Australia will be sitting there with its thumb up its b um with news reports screaming crisis when 3 new cases appear and everyone runs to buy all the TP off the shelves.”

      Agree.
      Isolate the elderly and infirm. Everyone else get on with it.

      The debt won’t borrow itself. At least not yet.

    • kannigetMEMBER

      You obviously think your outside the risk group, you probably want to think again.

      I agree its going to be a night mare to open up because it will run rampant, but its not just the old and infirm who are at risk. if the infection rate rises too high the pressure on the system mean people needing ICU for other reasons wont get it. for example a car accident, kid falling off a roof etc. hundreds of these happen every day.

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