Interest rates on fixed term mortgages are set to drop thanks to a recent fall in long-term money market rates, according to Datamonitor.
Harry Senlitonga, Datamonitor’s senior analyst, said the uncertainties in global markets have added downward pressure to interest rates, particularly on long-term market rates.
“The recent fall in long-term money market rates will affect pricing for many fixed rate products, such as term deposits and fixed rate mortgages. We should expect both term deposit rates and fixed rate mortgages to drop as a reaction to the recent change on market expectation for Reserve Bank of Australia (RBA) cash rate movements,” said Senlitonga.
Recent fears on foreign debt, particularly the European debt crisis, have affected the interest rate outlook for the year, with the latest view on the RBA cash rate remaining unchanged for the next couple of months.
While Datamonitor expects long-term deposit rates to decrease in the next few weeks, short-term deposit rates (interest rate for a period of less than a year) will remain unaffected. Datamonitor still expects term deposits to continue to show strong growth, mainly coming from risk-averse consumers who choose to invest in low-risk deposit products.
“For consumers, this shows an opportunity to lock in their savings at today’s rates before many term deposit providers reduce some of their term deposit rates in the next few weeks,” said Senlitonga.