AMP reduces fixed loan rates ahead of RBA meeting

AMP has become the latest financial institution to drop the rates it is offering customers ahead of the Reserve Bank's next meeting.

Rates for AMP's one, two, three and five-year fixed terms for both principle and interest and interest-only loans for owner-occupiers and investors have fallen 0.25 per cent.

AMP's new one-year rate will start at 5.89 per cent, while its three-year fixed rate now comes in at 5.70 per cent.

For investors, the new rate starts at 6 per cent for one year, while three-year loans come in at 5.73 per cent.

The new rates start from Wednesday, February 12.

The move comes before the RBA meeting on February 17-18 when the board is largely expected to cut the official cash rate from 4.35 per cent to 4.10 per cent.

Consensus from leading economists and money markets is there's a 93 per cent chance of a rate cut on February 18, as trimmed mean inflation heads towards the RBA's target range.

If they are right, Australia's official cash rate will fall from 4.35 per cent to 4.1 per cent.

AMP chief economist Shane Oliver said he was slightly less optimistic than the money markets.

"I think it is probably an 80 per cent chance," Dr Oliver said.

"The reason I think they will cut is because the inflation figures have surprised on the downside for the trimmed mean and that is what the Reserve Bank has been after all this time."

Dr Oliver is not alone in predicting a rate cut, with all four major banks now saying there will be a cut in February.

Commonwealth Bank was the first to call this back in October 2023, but ANZ, Westpac and NAB are also predicting a 25 basis-point cut at the February meeting.

NAB was the first of the big four banks to drop its interest rates last week.

According to Canstar, the cuts for owner-occupier fixed rates were up to 0.25 percentage points, while the cuts for investor fixed loans were up to 0.30 percentage points.

NAB's lowest fixed rate is now 5.84 per cent, available for owner-occupiers paying principal and interest with a deposit of at least 20 per cent on a three-year term.

Canstar data insights director Sally Tindal said with NAB cutting rates, others were likely to follow.

"The cost of wholesale fixed rate funding has started to ease slightly. This, combined with a prospective cash rate cut, should push other banks into moving on fixed rates," she said.

"While a few banks are now starting to sharpen their offerings, fixed rates still have a way to fall before they become fashionable again with borrowers."