Fixed interest rate mortgages are currently level with variable rates…..a rare enough event
In a historically rare event, three-year fixed interest rates are about the same as variable rates, which is good news for embattled budget-conscious first-home buyers.
Many prospective buyers have been holding back because they fear monthly mortgage repayments will rise when household expenses are going up.
Yet with three-year fixed rates at about 7.36 per cent on average, this gives first-home buyers, who have deserted the market, certainty in repayments in the early years of their home loan.
Damian Smith, the chief executive of the financial comparison website RateCity, said three-year fixed rate mortgages, relative to variable rates mortgages, are the lowest they have been since October 2009, something which was ”rare historically”.
The big banks are advertising standard variable rates of about 7.78 per cent, but Mr Smith said most customers can negotiate discounts of at least 0.5 percentage points off the advertised rates.
Drawing on data from the Bureau of Statistics, Mr Smith said there were about 60,000 fewer first-home buyers in the year to May 2011 compared to the year to May 2010. He said reasons for the low number include the ”pull-forward” of first timers into the market in 2009-10 because of the government’s First Home Owners Boost, as well as higher interest rates and low consumer confidence.
The chief economist at Westpac, Bill Evans, predicted last week the Reserve Bank would cut the interest rate by one percentage point by the end of September 2012, prompted by the collapse in consumer sentiment and increasing risk of a European sovereign debt default.
However most economists maintain the Reserve Bank will have to raise interest rates to contain inflation induced by the mining boom.
source: Domain.com.au John Collett