Fixed term rates tumble
Following a prolonged period in which variable interest rates have been pared to the bone, fixed term mortgage rates seem to be the new battleground amongst the banks.
The Commonwealth Bank started the trend last year with a five year fixed term at 7.25%, a full half a percent below the market. Although that offer lapsed just prior to Christmas, the New Year has seen it replaced with yet another marketing war amongst the banks.
On New Year's Day Colonial launched an aggressive one year boxed product at a rate below 5%, coupled with a transaction account, credit card, and insurance to continue its move from just a bank to a complete financial services provider.
CBA's latest offering is a three year rate of just 6.55%, which takes the rate below the average standard variable rate loan of 6.7%. This will surely appeal to those wanting to lock in at what looks to be the bottom of the cycle.
Not to be outdone the NAB has matched CBA's pre Christmas offer on a five year term at 7.25%, but with three year rates on offer under the variable, homeowners traditional reluctance to lock in for longer terms will be closely watched.
The RBA is unlikely to be moving rates in the first six months of 1998, but with an improving economy (Asian crisis permitting) and an impending election, the second half could be a different matter.