'The time to fix is when rates are expected to fall.'

Thinking of fixing? Fixed rate mortgages are at multi-decade 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 cut its rate on two-year fixed loans below 5 per cent on Thursday, figures from comparison website RateCity 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.

A spokeswoman at RateCity, Michelle Hutchison, said it had become 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.

‘‘We have never seen average three-year fixed rates this low,’’ Ms Hutchison said. ‘‘It came close in early 2009 but it 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, she said.

Westpac cut its two-year fixed rate by 0.4 percentage points to 4.99 per cent on Thursday. 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 next month, 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.