Best fixed rates on market and their savings revealed

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Castar data director Sally Tindall. Picture: Tim Hunter.

ANALYSIS

Banks will have breathed a sigh of relief last week, after the ABS’s September quarter inflation numbers came in hot.

No need to worry about a rate cut at the November RBA meeting. Or December for that matter. In fact, lenders may not have to worry about discounts to their customers’ home loan payments for six months or more.

Maybe not even again if this rate cutting cycle has come to an earlier than anticipated end.

Banks may be off the hook and can now get back to doing what they do best: Making lots of money for their shareholders.

MORE: RBA worst fears realised as home prices soar

That is, unless we keep them on their toes by finding those discounts ourselves.

There are currently a number of mortgage deals on the market that can save you significant money, if you are prepared to fix your interest rate.

Ordinarily, banks love you to lock in fixed rates when the RBA is in a cutting cycle, because they think they can tempt you into locking in a rate that will end up being higher than where variable rates fall to during your fixed term.

Right now, however, with inflation uncertainty, employment uncertainty and a fair bit of various other types of global uncertainty, borrowers can benefit with some certainty in their lives. A home loan saving locked in now via a fixed rate is unlikely to be undone by any major downward movements in variable rates over the next year.

In fact, it could also act as a hedge against an outcome that some pundits believe is getting more real by the day … that the RBA’s next move may even be a hike.

Canstar crunched the numbers and found there were significant savings to be made by fixing your home loan rate for one or two years, even if the RBA were to cut the cash rate again in the short term.

happy young couple welcome in new house showing door keys

Getting one over the RBA with your own rate cut may be an option. Picture: THINKSTOCK

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For one year fixed rate products, SWS Bank has the best offering of 4.69 per cent.

This is well below the lowest variable rate for an average borrower (with a $600,000 loan and 25 years remaining on the loan term), which is 5.08 per cent.

Fixing with SWS Bank for one year would save that borrower $2334 if the RBA did not cut for the next year. If the RBA cut once by 0.25 per cent, the switch would still see the borrower save $1342. Two rate cuts and the borrower would still save $725.

For two year fixed rate products, Australian Mutual Bank and Pacific Mortgage Group lead the market with 4.74 per cent.

Over two years, the borrower could save $4055 if there were no RBA cuts and $1585 if there was one cut. In this scenario however, two rate cuts would see the fixed rate borrower worse off by $504.

Canstar data insights director Sally Tindall said only a small fraction of the borrower market locked in fixed rates, despite the savings on offer.

“The peak of fixing was July 2021, when rates were at a historic low,” Ms Tindall said. “At that point 46 per cent of new and refinanced loans opted for a fixed rate according to the ABS.”

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No one really knows what RBA Governor Michele Bullock has in store. Picture: Monique Harmer

Back then, the cash rate had been lowered to 0.1 per cent and there were fixed rates on offer of 2 per cent and below, with four year terms available.

Fast forward to April, 2024 and just 1.2 per cent of borrowers opted for fixed. The take up this year is similarly low.

“CBA’s full year results show that in the six months to June 2025, 1 per cent of new loans opted for a fixed rate, in dollar terms,” Ms Tindall said. “Westpac’s full year results for the six months to September 2025 show the same – that is – 1 per cent of new loans opted for fixed.”

Ms Tindall said it was important to realised that nothing is guaranteed when it comes to RBA cash rate movements.

“Things can change and decisions can be made quickly,” she said. “There is absolutely no guarantee that you will save $4000 by fixing for two years.”

She said that mortgage offsets were also rare with fixed rate products, meaning savings on repayments could be completely swallowed up by the lack of flexible features in the loan, but that there were exceptions.

“Offset accounts aren’t usually offered on a fixed rate loan, however (some) banks offer them. This includes Adelaide Bank, MOVE Bank, Qantas Money, ANZ (on its one-year fixed loan only) and BankWest (partial offset).”

Finder head of consumer research Graham Cooke said anyone considering fixing should weigh up some key questions.

“Even though the chance of a cut this year has increasingly disappeared, two thirds of experts on our panel are still predicting at least one cut in the next 12 months,” Mr Cooke said.

“So, fixing will depend on whether you think this is true or, as some more controversial commentators have suggested, we could actually see spiralling inflation and a rate rise.

“I wouldn’t be locking in a fixed rate just yet, but the next few months of economic data will be crucial.”