RAMS Home Loans has ignited a mortgage price war, undercutting major banks in Australia on fixed-rate mortgages.
The lender slashed its two- and three-year fixed-rate mortgage by 0.31 percent.
Starting June 16, two-year fixed-rate mortgages were 6.98 percent, making it the lowest rate in the fixed market, and the three-year fixed rate was slashed to 7.23 percent, in line with the lender’s standard variable mortgage rate.
The reduction came despite an expected future interest rates increase, and this may prompt a rates war, as big banks and rival lenders look to compete.
Michelle Hutchison, consumer advocate at RateCity, said she expects that big banks will also cut their interest rates.
"Currently fixed loans only take up a small market share of home loans and they are a strong investment proposition for the lender. It is likely that they would want to increase that market share again by dropping fixed rates to attract customers," she said.
While most Australians have flocked to major banks in the past two years due to perceived strength, RateCity encouraged people to continuously compare various lenders.
"Most of the smaller lenders have better rates because they need to do this to gain market share," said Ms. Hutchison.