Huge Aussie bank DROPS interest rates – here’s what you need to know

A major bank will start slashing fixed rates in a sign the big lenders are expecting steep rate cuts in 2025 as inflationary pressures ease.

Macquarie Bank is cutting its two-year fixed rate by 20 basis points to 5.39 per cent on Thursday, down from 5.59 per cent for owner-occupier borrowers with a 30 per cent mortgage deposit.

This will be Australia’s lowest fixed rate, with the 30-day interbank futures market  now expecting the Reserve Bank of Australia to cut rates four times in 2025.

The latest cut, coming into effect on Thursday, would also shave $80 off monthly repayments on an average, $641,000 mortgage. 

Macquarie Bank’s rate is much lower than the Commonwealth Bank’s equivalent two-year, 6.29 per cent fixed rate for those paying off principal and interest. 

Macquarie Bank’s two-year fixed rate for investor landlords is falling to 5.55 per cent for those paying off principal and interest.

Its interest-only investor loan rate is dropping to 5.69 per cent from Thursday, with a Macquarie Group spokeswoman confirming the changes to Daily Mail Australia.

While RBA Governor Michele Bullock has ruled out relief before Christmas – from an existing 12-year high of 4.35 per cent – the futures market is expecting her board to cut rates by 100 basis points next year.

This would take the RBA cash rate to 3.35 per cent for the first time since March 2023. 

Expectations of big rate cuts means the banks are now offering lower fixed than variable rates.

But Australian Property Podcast host Pete Wargent said the prospect of big rate cuts meant variable rates made more sense for now, arguing those choosing fixed rates in 2024 could miss out on relief if the RBA kept on easing.

‘I would probably stay variable unless I really needed the certainty of cashflow,’ he said.

Macquarie Bank’s variable rate is higher at 6.14 per cent, with its Macquarie Group parent company not expecting the first RBA rate cut until March 2025.

NAB, ANZ and Westpac are expecting the rate cutting to begin in February next year while the Commonwealth Bank, Australia’s biggest home lender, is now forecasting a December rate cut. 

Headline inflation in August fell to 2.7 per cent, putting it inside the RBA’s 2 to 3 per cent target for the first time since August 2021 when Sydney and Melbourne were still in lockdown. 

Macquarie Bank is cutting its two-year fixed rate by 20 basis points to 5.39 per cent on Thursday, down from 5.59 per cent for owner-occupier borrowers with a 30 per cent mortgage deposit

But underlying inflation was still higher at 3.4 per cent when volatile items were removed – including falling petrol prices and the one-off effect of the federal government’s $300 electricity rebates. 

The latest 20 basis point cut, on Macquarie Bank’s cheapest fixed rate loan, would see monthly repayments fall by $80 to $3,596 on an average, $640,998 mortgage. 

Ms Bullock last month confirmed a rate rise wasn’t being considered at the RBA’s two-day meeting in September, marking a big departure from the language she had used in August.

‘We didn’t explicitly consider an interest rate rise at this meeting,’ she told reporters in Sydney.