After a long stretch of rising interest rates and higher repayments, the tide is finally starting to turn. In recent weeks, several major and regional lenders have begun offering fixed home loan rates under 5%, sparking renewed interest in refinancing, upgrading, and entering the property market.
At Hayes Financial, we’ve been following these shifts closely — because the next 12–18 months could reshape the mortgage landscape in Australia.
The Current Fixed Rate Market
A number of lenders have sharpened their pencils:
- Commonwealth Bank (CBA) has released a two-year fixed rate at 4.99% for eligible owner-occupiers with a solid deposit and package loan.
- Westpac has gone one step further, offering a two-year fixed rate as low as 4.89%, making it the first major bank to break below the 5% mark in this cycle.
- HSBC has fixed-rate offers such as its “With Package” loan around 5.34% (depending on Loan-to-Value Ratio), still competitive for those with strong profiles.
- Newcastle Permanent has trimmed its Premium Plus Package fixed rates, with options from 4.89% on shorter fixed terms for borrowers with LVRs of 80% or less.
These moves show that banks and non-majors alike are preparing for a period of lower funding costs and increased competition.
Why Fixed Rates Are Falling
The reason lenders are willing to commit to lower fixed rates now is because they’re pricing in future rate cuts. Wholesale funding markets — the mechanism banks use to secure money for fixed loans — are already anticipating that the Reserve Bank of Australia (RBA) will ease policy further into 2026.
Simply put: fixed rates reflect not where the cash rate is today, but where markets expect it to go tomorrow.
What Economists Are Predicting
- Big Four Banks expect at least one cash rate cut in late 2025 (likely November) and potentially another in early 2026, depending on inflation.
- Westpac’s Chief Economist Bill Evans has flagged that the RBA could reduce the cash rate by a full 0.5% to 0.75% over the next 12–18 months if inflation tracks lower.
- CBA’s Gareth Aird similarly sees easing ahead, predicting that by mid-2026 the cash rate could settle closer to 3.0%–3.25%, down from current levels.
- OECD forecasts line up with this view, with Australia expected to gradually unwind restrictive settings while maintaining economic stability.
What This Means for Borrowers
Whether you’re a homeowner, investor, or planning to buy, here’s how the current environment could affect you:
- Refinancers: Sub-5% fixed rates could be a chance to reset your repayments lower and lock in certainty after two years of volatility.
- Homeowners on Variable Rates: You may choose to ride the expected RBA cuts — but remember variable rates move with policy, and savings may take time to flow through.
- Investors: Lower rates improve borrowing capacity and cash flow, potentially reigniting interest in investment property markets.
- New Buyers: Fixed rates can provide repayment stability in your early years of ownership, but you’ll need to weigh this against potential further falls in variable rates.
Example: Refinancing in Today’s Market
Take a $600,000 home loan.
- At a 6.2% variable rate, repayments sit around $3,700/month.
- Switching to a two-year fixed rate at 4.89% (Westpac or Newcastle Permanent) brings repayments down to roughly $3,340/month.
That’s a saving of about $360 every month — or more than $8,500 over two years.
The Next 12–18 Months
Here’s what we expect:
- RBA Cash Rate: At least one more cut in 2025 and possibly two or three cuts by mid-2026, easing rates closer to 3%.
- Fixed Rates: Continued downward trend in 2- and 3-year fixed rates, as competition intensifies among the majors and regional lenders.
- Variable Rates: Gradual reductions, but slower to fall than fixed rates. Borrowers staying variable will need patience.
- Borrower Behaviour: We’re likely to see more people split loans — fixing part of their debt for certainty while leaving part variable to take advantage of cuts.
Our Take at Hayes Financial
The fact that fixed rates are back under 5% is more than a headline — it’s a signal that the market is shifting. Whether this is your time to fix, refinance, or restructure depends on your personal goals, deposit or equity position, and appetite for certainty versus flexibility.
At Hayes Financial, we’ll help you make sense of these trends, compare lenders like CBA, Westpac, HSBC, and Newcastle Permanent, and find a solution that puts you in the best position for the next 12–18 months.