The Reserve Bank of Australia has left interest rates on hold at 2.50 percent at its August meeting, marking 12 months since the last rate cut and almost 4 years since the last rate increase.

But that hasn't stopped banks slashing the cost of fixed rate mortgages, according to new research from Australia’s leading financial comparison site, RateCity (www.ratecity.com.au).

RateCity can reveal that in the past fortnight, 71 home loans with a 5-year fixed term have had interest rates slashed by as much as 0.80 percentage points.

Alex Parsons, CEO of RateCity.com.au, said it’s great news to see consumers continuing to benefit from lower interest rates in the absence of an RBA-led rate change.

“The really good news is that, despite the cash rate being on hold for 12 months, more banks are moving out of cycle and dropping interest rates,” he said.

“In the past fortnight, three of the Big Four banks – Commonwealth Bank, NAB and Westpac – have lopped their 5-year fixed rates by as much as 0.80 percentage points to a record low of 4.99 percent, while ANZ has cut it’s 5-year fixed rate by 0.30 percentage points to 5.49 percent.

“Five-year fixed rates have come down by 0.54 percentage points on average in two weeks – that’s more than we’d typically see passed down by the RBA in any given month,” he said.

Moving from the current average standard variable rate of 5.40 percent to a 5-year fixed rate of 4.99 percent cuts monthly repayments by $72 on a typical $300,000 home loan and saves borrowers $4320 over the first five years. That’s assuming variable rates remain at record lows and excluding any fees.

So should home owners consider fixing their mortgage?

At the very least, borrowers should review their current home loan situation, said Parsons.

“My advice is if your home loan rate starts with a 5 then get out there and find a better rate – 4.99 percent is a sharp rate and gives consumers a great amount of certainty over a long period of time in a cycle whereby most people would assume that interest rates are going to go up over time and not further down”, he said.

“What borrowers need to also understand is that you don’t have to fix 100 percent of your home loan – you can have a foot in both camps with a split home loan.”

Finally, Parsons urges borrowers to avoid getting in debt beyond their means.

“My clear message to borrowers is even in times of cheap money, such as today, make sure you can withstand a 2 percentage point increase in rates and still be able to afford those repayments. That’s something people really need to understand so they don’t find themselves in mortgage stress when rates eventually do increase.”

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