In response to the shock Brexit referendum our 5 year swap rate has collapsed by 7% to 2.32% today. This is the reference rate from which the 5 year fixed housing interest rate is derived. Odds increase for lower interest rates in the near term.
The 5 year swap rate has declined to 4.78%. This is down from 5.12% only 4 weeks ago and 5.03% last week.
The swap rates are the cost to the banks of borrowing funds for a fixed period. A margin is added to this, which is then what the mortgage holder obtains.
The majority of 5 year fixed rates are currently around the 7.50% level.
So despite a decrease in the cost to your bank of 5 year money recently, there has been no decrease in cost to the customer.
An anouncement from the Reserve Bank on the Official Cash Rate is due on the 30th of this month. We are expecting a cut of 0.50% with some reasonably strong wording around the banking system passing on the cuts to customers and statements that interest rates could remain low for some time yet. This could jolt some further decreases in swap rates with hopefully lower home loan interest rates for customers.
If your considering re fixing your home loan at present, we suggest you wait until after the Reserve Bank announcement.