Is it time to lock in your mortgage?

Big four banks cutting mortgage rates to the lowest point since the GFC.

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Westpac (ASX: WBC) has caught its rivals off guard after yesterday dropping its one-year fixed-rate home loans to 4.79% — but will it go lower?

Bank of Melbourne and St George (subsidiaries of Westpac) both lowered their rates even further, cutting mortgage rates to their lowest points since the GFC. Bank of Melbourne Chief Executive Scott Tanner said that the move was the result of the RBA’s rate cut earlier this month, which gave the home loan marketplace a “confidence booster”.

Since the rate was cut, the big banks have been hurrying to impress the market, with all of them passing on the rate cut in full except ANZ (ASX: ANZ), which went further than the 25 basis points and gave customers a 0.27 percentage point cut. The moved matched the NAB’s (ASX: NAB) rates and challenged its title as the lowest lender.

Kirsty Lamont of comparison site Mozo said that “I think it presents a bit of borrower’s dilemma about whether to lock in now or hold back and see if rates fall further” but says that “the fact that the banks are cutting their fixed rates so aggressively  shows they are pricing further rate cuts”. Westpac says that home loan take-ups doubled when it dropped its interest rate in February.

Westpac is trying to entice potential mortgagees with its low fixed rate offer but it still has the highest standard variable mortgage, currently at 6.26%.

Foolish takeaway

Recently, the big four banks’ share prices have soared, fuelled by record profits from cost-cutting. Perhaps the major exception to this is ANZ’s ‘Super Regional Strategy’, which has been growing revenues from its Asian expansion over the past five years. With a lack of growth, the banks will be looking to secure their inflated share prices by gaining market dominance in home loans to avoid a premature drop. This has been a consistent source of income for the big four, including the Commonwealth Bank (ASX: CBA).

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