BREAKING NEWS Major Aussie bank slashes mortgage rates - but theres a catch

A major Australian bank has slashed fixed mortgage rates for the second time this year in a sign lenders can expect some much-needed relief.

Macquarie Bank, Australias fifth biggest bank, has cut its two and three-year fixed rates by 16 basis points to 5.39 per cent.

Mozo money expert Rachel Wastell said Macquarie was muscling in on the Big Four banks. 

The Big Four should watch out, as Macquarie is making moves and will be one to watch in the year ahead as I predict theyll continue to grow their home loan book and their position as a leading home lender, she said.

Plus, for Aussie homeowners who prefer to bank with a "big bank", they have the added security of moving their home loan to Australias fifth biggest home lender.

Australias lenders are offering fixed rates that are more competitive than their variable rate mortgages.

Financial markets are expecting two more Reserve Bank interest rates cuts this year, that would take the cash rate down to 3.6 per cent from 4.1 per cent now.

That would see borrowers on a variable rate get another 50 basis point rate cut.

Macquarie Bank, Australias fifth biggest bank, has cut its two and three-year fixed rates by 16 basis points to 5.39 per cent (pictured is a bank branch in Sydney)

Mozo money expert Rachel Wastell said Macquarie was muscling in on the Big Four banks

Macquaries lowest two-year fixed rate of 5.39 per cent caters to borrowers with a 30 per cent mortgage deposit, and is available as part of an offset package.

By comparison, Macquarie Banks lowest variable rate is at 5.89 per cent for borrowers with an equivalent 30 per cent deposit. 

A borrower who fixed their mortgage for two years would not be worse off should the Reserve Bank only cut rates two more times.

But they would be worse off should the RBA cut rate three more times to 3.35 per cent. 

Someone with an average $600,000 would be $93 a month or $1,116 a year worse off if they fixed their rate for two years instead of staying with a variable rate. 

Ms Wastell suggested splitting a loan between fixed and variable portions as a hedge against either fewer rate cuts, should inflation climb again, or more rate cuts, should Donald Trumps tariffs cause a global recession.

Hedging your bets with a split loan could give you the best of both worlds - stability in repayments while still benefiting if rates fall further, she said.

 Just because the RBA kicked off the rate cutting cycle last month - and most lenders passed the cut on - doesnt mean future RBA cuts will be passed on in the same fashion. 

Financial markets are expecting two more Reserve Bank interest rates cuts this year, that would take the cash rate down to 3.6 per cent from 4.1 per (pictured, homes in Brisbane)

There is a level of economic uncertainty ahead, especially with the risk that Trumps tariffs could fuel inflation, or slow down the pace of the rate cutting cycle.

Australian steel and aluminium exported to the United States have been hit with 25 per cent tariffs.

Pharmaceutical and agricultural exports are likely to be hit with American import taxes from April 1.

That is also the date of the Reserve Bank of Australias next interest rate decision.