The National Australia Bank is likely to follow the other big three banks and drop its fixed interest rate for home loans, RateCity chief executive Damian Smith says.
"ANZ now leads the market with a two and three-year fixed rate of 6.44 percent (effective 17 August)," Mr Smith told Nine News Finance. "NAB's three-year fixed rate of 6.79 percent is pretty competitive, and they've tended to focus on having the lowest standard variable rate in their advertising, but they’re unlikely to sit still for long."
Over the weekend the ANZ bank cut its fixed-rate loans.
ANZ chief executive Philip Chronican said there was a "great deal of uncertainty" in global markets and economists had divided views on the future movement of interest rates.
"In this environment, we know many people are thinking about bringing more certainty to their mortgage repayments," Mr Chronican said.
ANZ cut its one-year fixed home loan rate by 0.3 percent, its two year rate by 0.55 percent and its three year rate by 0.6 percent.
Commonwealth Bank of Australia and Westpac have already cut their home loan interest rates.
However, it looks like there will be no movement on fixed rates with economists predicting that high inflation will keep rates steady in the short-term.
"We've got a domestic economy that's very strong and the Reserve Bank is worried about inflation," Mr Chronican said.
"There's very little reason for them to cut rates other than the crisis of confidence that we're starting to see in the rest of the world."
Mr Smith agreed and said that while economists were divided, he still thought there would be no rate cut.
"We still think it's unlikely unless there are signs of major increases in unemployment in Australia," he said.
Most borrowers on variable rates would be best off assuming no change, and therefore trying to increase their repayments as much as they can afford to."
However Commonwealth Bank chief executive Ralph Norris said even if the RBA cut rates, interest rates could still go up due to international borrowing costs.
Mr Smith said the best strategy for most borrowers remains the lowest possible variable rate with the highest possible monthly repayments
“However there are brief and rare windows when fixing a loan might make sense. When long-term (such as three-year) fixed rates are very close to variable rates, it’s worth taking a close look at fixing,” he said.
“Having said that, a good borrower with a solid deposit, track record of savings, and good employment prospects may be able to negotiate their variable rate down even lower, so whatever you choose, haggle hard the banks need your business right now!”