Mortgage war drops rates even lower

Despite the RBA cash rate remaining at a record low 0.1% for five consecutive months, Australian mortgage rates continue to drift lower.

According to the RBA’s indicator lending rates, the average owner-occupied discount variable mortgage rate was a record low 3.65% in February, whereas the average 3-year fixed mortgage fell to only 2.19%:

Fixed mortgage rates cratered 1.46% below variable mortgage rates in February 2021.

Rates available on new mortgages were even lower, with the typical owner-occupier able to grab a 3-year fixed rate mortgage at just 2.1% interest, or they could pay just 2.0% interest if they opt for a fixed rate mortgage over 3-years:

Rates on new fixed term mortgages have plunged to around 2%.

The data in the chart above is only current to end-January 2021, and since then rates on offer have plunged even further.

Last week Westpac announced that it would cut its two and three-year fixed mortgage rates by up to 20 basis points to a record low 1.79% (two-year), 1.88% (three-year), and 1.89% (four-year).

One lender, Homestar Finance, has taken the mortgage rate war to a whole new level, offering the lowest two-year fixed interest rate in history at just 1.74% with its variable rate also the lowest at just 1.79%:

β€œThis loan is the lowest two-year fixed rate on the market and also the lowest overall home loan rate available nationally,” [RateCity research director Sally Tindall] said…

In the past two months, 450 fixed rates have been cut across the home lending market.

With the cash rate close to zero, it is hard to believe that mortgage rates continue to fall. A big reason is that the RBA has replaced banks’ wholesale funding via its Term Funding Facility (TFF), which lends to banks at just 0.1%.

Mortgage rates could fall much lower still if the RBA follows Europe’s lead and drops the TFF rate into negative. This would effectively pay banks to lend and could send fixed mortgage rates to 1% or lower.

Unconventional Economist


  1. innocent bystander

    makes it so easy to offer an extra $50k to secure a house if it is only going to cost you $20pw
    aka easier to spend other people’s money than your own.

    • Goldstandard1MEMBER

      Savvy people bidding against other more savvy people with bank money with no concern of EVER paying it back.
      What could go wrong? LOLOLOL
      **popcorn and Red Rock Sweet chilli chips at the ready**

    • happy valleyMEMBER

      And you are never going to have to repay the principal when Josh gets his irresponsible lending laws through. How good is Straya.

      • The Travelling Albatross

        I’m afraid the ones with mortgages will be bailed out and savers will be left out when that collapse happens


          Seriously though. Who actually saves anymore? I’ve actually backed off work because I don’t see the point in getting much extra savings and I dont need the extra money to speculate further. The extra money saved is basically worthless, cash really is transh. Can’t put it in the bank and the risk premium is too high elsewhere. Rather have my time.

      • I still feel these Irresponsible lending laws are all about getting the homeowner to hold the bag on the debt than the banks. So that seems to be the opposite of what Josh is trying to do. Make sure that the onus on these dirty mortgages sit with the savvy investor and not his banks.

        • RobotSenseiMEMBER

          Is there a savviness index for the average IP? I’d hate to think non-savvy investors are getting their toes wet.

        • I agree. I actually think this has been mentioned by Josh in broad daylight.
          It’s the “borrower responsibility” when getting a loan.

  2. If the economy is so good & houses prices are going into the stratosphere why on earth are we dropping interest rates? What’s the point?

      • Charles MartinMEMBER

        From what I have heard, reusas relations parties sometimes involve the pooper.


      Those are the sorts of questions that will get you disappeared in this little potempkin village. If you know what’s good for you you’ll leverage yerself and yer children to the eyeballs and watch reruns of the Block and Grand designs to better educate yourself on the might and glory of Strayan Property.

      • The Traveling Wilbur

        Why won’t they leave Grand Designs alooooone? 😨😨😨😨😨😨

  3. Very tempted to split a portion of my loan to 1.99% fixed for 4-years, but I reckon variable will get down there anyway in that time.

  4. Greater Bank, 1.69% for 12 months fixed as OO. Unbelievable.

    Ubank’s 1.75% is pretty nuts also. Crazy times.