Thinking of fixing? Fixed rate mortgages are at all time lows.

Lenders have cut interest rates for the most popular type of fixed-rate mortgage to their lowest levels in more than two decades, amid bets the cash rate will fall to a record low as early as next month.

As Westpac recently cut its rate on two-year fixed loans below 5 per cent , figures showed the average cost of a three-year fixed home loan has fallen to its lowest level in 23 years, at 5.53 per cent.

Greg Morton says “it’s now cheaper for the banks to offer these mortgages because of growing market bets the Reserve Bank would cut the cash rate from 3 per cent.

‘‘Average three-year fixed rates have never been this low. Early 2009 was the last time rates were in this territory but they didn’t reach the average 5.53% that we currently have right now.’’

NAB’s three-year fixed loan is 5.29 per cent and ANZ, the Commonwealth Bank and Westpac charge 5.39 per cent, he said.

Westpac recently cut its two-year fixed rate by 0.4 percentage points to 4.99 per cent.
The bank now offers the cheapest two-year fixed loan among the big four.

Fixed-rate mortgages are priced off bank bill swap rates — which measure market expectations of moves in official interest rates.

Investors are betting there is a 50 per cent chance the Reserve Bank will cut the cash rate to 2.75 per cent in August, after governor Glenn Stevens this week said there was ‘‘scope to ease policy further.’’

The cuts come amid signs a growing number of borrowers are choosing to fix their home loan, although most still choose a variable interest rate.

Official figures show about 14 per cent of new loans had fixed interest rates in November, up from about 10 per cent six months earlier.

With credit growth remaining sluggish among consumers, banks are also pushing fixed-rate loans as a way to attract more business.