With yesterday’s decision to keep rates on hold coming as little surprise, industry groups are now turning their attention to banks and lenders.

Over the past fortnight, 71 home loans with a five-year fixed rate term have had their interest rates cut by up to 0.80%, according to RateCity research.

Unsurprisingly, this is becoming of greater interest to borrowers as lenders increasingly move out of the RBA’s cycle that has been stable for 12 months now at 2.5%.

Despite much of the RBA talk discussing the next potential increase, most industry members wholeheartedly agreeing that we’ve hit the trough despite disagreements about when we will see a rise. Responses yesterday to the next month of stability mirrored 1300HomeLoan’s sentiments that more cuts are coming, not necessarily form the RBA, but from the lenders.

“The home loan customer is in a strong negotiating position and your lender will be keen to listen, particularly if you raise the possibility of looking elsewhere,” 1300HomeLoan managing director John Kolenda said.

“We are seeing some of the lowest fixed rates ever and there’s also good deals being offered on variable rates.”

“The borrowing costs for banks in the global market have fallen and they are in a position to offer highly competitive home loan products.”

Meanwhile, CEO of RateCity Alex Parsons said that those dropping rates at the moment includes three of the big four banks.

“Five-year fixed rates have come down by 0.54 percentage points on average in two weeks – that’s more than we’d typically see passed down by the RBA in any given month,” said Parsons.

“My advice is if your home loan rate starts with a five then get out there and find a better rate – 4.99% is a sharp rate and gives consumers a great amount of certainty over a long period of time in a cycle whereby most people would assume that interest rates are going to go up over time and not further down,” he said.

Loan Market director Mark De Martino was also pointing out the heavy competition, noting that there are drops across three, four and five-year fixed term products.

Despite this, the warnings are starting to emerge from all quarters.

“A couple years ago, I doubt anyone would have thought you could have got a fixed rate below five per cent for five years. While it’s certainly an attractive rate now, there’s wider implications borrowers need to consider before they take up fixed rates,” De Martino said.

“Whilst fixed rates do not move up and down in sync with the cash rate they are indicative of what lenders think it’s going to cost to borrow money in the future – seeing so many move rates down is further evidence to support the perception that interest rates may remain low for quite some time,” he said.

Meanwhile, Parsons warned that borrowers must ensure that they can withstand a 2% increase in rates and afford the repayments, even in times of “cheap money”.

“That’s something people really need to understand so they don’t find themselves in mortgage stress when rates eventually do increase,” he said.

The Real Estate Institute of New South Wales president Malcolm Gunning was also putting borrowers onto the alert.

“While these record low interest rates have been welcomed by consumers, we must once again caution mortgage holders that the fairytale will eventually end. It is important not to over-commit yourself and be prepared for future rate rises,” he said.

this article appeared in propertyobserver.com.au