ANZ is cutting interest rates for Australians with a mortgage

ANZ has become the latest of the Big Four banks to cut fixed mortgage rates, with generous relief for borrowers expected next year.

The banking giant cut the three-year fixed rate by 60 basis points to 5.99 percent on Friday, while the two-year fixed rate was cut by 55 basis points to the same level.

Australia’s Big Four banks are now all offering three-year fixed mortgage rates, starting with a ‘five’ for borrowers with a 20 per cent deposit, following ANZ’s latest move.

This is happening as financial markets predict four rate cuts by the Reserve Bank in 2025.

RateCity money editor Laine Gordon said ANZ had given in to its competitors in a sign that other lenders were also likely to cut their fixed rates.

“ANZ is the last big four bank to cut fixed home loan rates below 6 per cent, but the bank has succumbed to the competition,” she said.

‘The number of lenders joining the ‘under six’ club is growing rapidly.’

More than 70 lenders now offer a fixed rate that starts with a ‘five’, data from RateCity shows.

ANZ has become the latest of the Big Four banks to cut fixed mortgage rates

However, the lowest fixed interest rates offered by the Big Four banks are still higher than Abal Banking’s market-leading variable rate of 5.75 percent.

This means that customers with lower variable rates would benefit if the RBA were to cut rates by 100 basis points, as forecast, without providing more relief in 2026.

The Big Four banks still only offer variable interest rates, starting with a ‘six’, with ANZ now offering the lowest rate of 6.14 percent.

This is slightly lower than the Commonwealth Bank’s 6.15 per cent level and well below NAB’s 6.79 per cent and Westpac’s 6.44 per cent.

The smaller players still offer lower fixed rates than the Big Four banks.

SWS Bank has the lowest fixed rate of 4.99 per cent, meaning a borrower now on a variable rate, starting with a ‘six’, won’t miss out if the RBA cuts rates four times next year.

Australia’s Big Four banks now all offer three-year fixed mortgage rates below 6 percent, following ANZ’s latest move

Macquarie Bank offers fixed interest rates for two, four and five years of 5.39 per cent.

The 30-day interbank futures market now expects the Reserve Bank to cut interest rates in March from the existing 12-year high of 4.35 percent.

It expects four cuts in 2025 that would bring the cash rate back to 3.35 percent for the first time since March 2023, partially reversing the RBA’s 13 increases in 2022 and 2023.

New Zealand has already cut interest rates twice this year, while central banks in the US, UK, Canada and the European Union will also ease monetary policy in 2024.

But Westpac chief economist Luci Ellis, a former assistant governor at the Reserve Bank of Australia, said central bank interest rates were likely to be higher in the 2020s than in the 2010s.

“Real interest rates have been falling for decades, but a very long-term view supports our thesis that future interest rates will be higher on average than before the pandemic,” she said.