The cuts to fixed-loan rates follow a dramatic shift in global economic sentiment over the past few weeks. Growing concern about the euro zone debt crisis and the possibility of a double dip recession in the US triggered turmoil on international financial markets.

The interest rates on long-term bonds have also fallen sharply, making it cheaper for lenders to fund mortgages. This has helped banks offer lower interest rates for fixed-term home loans.

Commonwealth Bank cut the interest rates on its fixed home loans by between 0.25 and 0.6 percentage points yesterday. Westpac reduced its three-year fixed rate by 0.2 of a percentage point while the Westpac-owned St George Bank cut both its two- and three-year fixed home loan rates by 0.2 of a percentage point. ING Direct also reduced its fixed home loan rates.

Some three-year fixed mortgage interest rates are now more than 0.5 of a percentage point lower than the basic variable mortgage interest rates offered by the big banks.

Despite this, many market economists believe the Reserve Bank will leave interest rates unchanged until global economic and financial conditions becomes clearer. The relative health of the economy was underscored yesterday when the National Australia Bank revealed earnings of $1.4 billion for the June quarter.

To talk to someone about fixed rate, and whether they would be right for you, contact Home Loans Australia for a fee-free and obligation-free home loan assessment. Call 1300 HOME OZ today!