Macquarie Bank drops interest rates

By DAVID SOUTHWELL, NEWS REPORTER

Published: | Updated:

A major bank has started slashing fixed interest rates ahead of the Reserve Bank's decision next month on whether to ease the official cash rate.

On Tuesday, Macquarie Bank dropped its one-year fixed rate from 5.85 per cent to 5.69, four weeks before the Reserve Bank's next cash rate decision on February 18.

Macquarie Bank's two-year fixed rate decreased from 5.69 to 5.55, and the three-year fixed rate dropped from 5.69 to 5.55.

The four and five-year fixed rates remain steady at 5.69.

Canstar data insights director Sally Tindall said the move could create a domino effect in the fixed-rate market.

'The fixed rate market has been relatively quiet over the summer break, with more lenders hiking these rates in the month of December than cutting,' she explained.

'However, this move from Macquarie could push other lenders into taking a look at the competitiveness of their fixed rates in the lead-up to the RBA's next meeting.

'Right now, the majority of borrowers are opting to stay on a variable rate, most likely in the hope we'll see a flurry of cash rate cuts that will deliver relief in the months ahead.

Macquarie Bank is cutting fixed interest rates

Macquarie Bank is cutting fixed interest rates

'If you’ve got a mortgage, don’t bank on there being a multitude of cuts in quick succession. While at least one cash rate cut this year is highly likely, not even the RBA knows exactly how many there will be.'

The RBA's 13 hikes in 2022 and 2023 were the most in a row since the late 1980s as it tried to quell rampant inflation.

The most competitive fixed mortgage rates currently available include a one-year rate of 5.59 from Police Bank, a two-year rate of 5.49 offered by Easy Street, Bank Vic, and Community First Bank, and a three-year rate of 4.99 from SWSbank.

Macquarie Bank also offers significantly lower fixed mortgage rates compared to the big four banks.

For a one-year term, Commonwealth Bank has the highest rate at 6.39, followed by NAB at 6.29, ANZ at 6.14, Westpac at 6.09, and Macquarie at 5.69.

Just 2.6 per cent of Australian mortgages were solely fixed rates, figures from the Australian Bureau of Statistics showed last August.

The RBA's 13 hikes in 2022 and 2023 were the most aggressive since the late 1980s

The RBA's 13 hikes in 2022 and 2023 were the most aggressive since the late 1980s 

Around 70 per cent of borrowers are on variable rates with the rest having fixed rates for a limited period.

Westpac chief economist Luci Ellis told Daily Mail Australia that it expected the Reserve Bank would cut rates in the first half of the year.

'The question is really when and how far?' she said.

'We still think the most likely start date is May but there is a chance of an earlier start, so at the February meeting or April meetings.'

NAB Group CEO Andrew Irvine said he expected to see the RBA cut interest rates by the middle of the year. 

The NBA, ANZ and Westpac banks have all predicted a 25 basis points cut in May, taking the rate to 4.1 per cent.

Commonwealth Bank head of Australian economics Gareth Aird is forecasting an earlier cut.

'Our base case is for the RBA to commence normalising the cash rate in February 2025 with a 25bp (basis points) interest rate cut,' he wrote last month.

'We look for 100bp of easing over 2025 that would take the cash rate to 3.35 per cent.'

The cash rate is currently at a 12-year high of 4.35 per cent after an aggressive run of hikes following the Covid period's record low level of 0.1 per cent in May 2022. 

Despite language that hinted at a near-term reduction, the RBA left rates on hold in December for the 13th month in succession. 

Macquarie Bank

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