Australia’s key banks have started to reduce their fixed home loan interest rate offerings with some now dropping below 6%. Despite the drops the latest Australian Bureau of Statistics figures show only 1.9% of borrowers in July opted for a fixed interest rate.

Homeloanexperts.com.au senior mortgage broker Jonathan Preston predicts fixed rates may fall even further and to as low as 4%, although he believes it will be longer before variable rates reduce to such levels.

Homeloanexperts.com.au CEO Alan Hemmings says the falling fixed rates are a sign that the banks believe the RBA will make future cash rate cuts. “Fixed rates usually indicate where the market expects the cash rate and variable rates to go, though they don’t always predict the timing accurately,” he says. “Most lenders are adjusting their medium-term fixed rates – two- and three-year terms – which suggests they are locking in clients at higher rates before the market eventually adjusts,” he says.