86 400 cuts fixed home loan rates, but not in line with partner UBank

Neobank 86 400 is cutting some shorter-term fixed home loan rates for homeowners and investors today, keeping things ‘business as usual’ for now despite its impending merger with UBank.

86 400 has cut one, two and three-year owner-occupier fixed rates by up to 0.31 percentage points today. Investor rates on one and three-year fixed loans were also cut by up to 0.15 percentage points.

The neobank’s fixed interest rates are the same for borrowers with larger deposits of 30% or 40%, although the comparison rates are slightly lower for those customers.

Canstar finance expert Steve Mickenbecker said 86 400’s changes did not see its home loan rates align with its new partner, NAB’s digital subsidiary UBank, which currently has cheaper mortgage rates on offer.

For instance, UBank’s one year-fixed home loan has a rate of 1.75% (2.31% comparison rate) compared to 86 400’s 1.84% (2.76% comparison rate) for owner-occupiers with a 20% deposit paying principal and interest.

The two banks have been officially approved to merge, and are set to launch a new bank together soon, following NAB’s acquisition of 86 400.

“At this stage of the merger it’s business as usual for 86 400,” Mr Mickenbecker said.

While 86 400’s shorter-term rates were lowered today, the neobank left its five-year rates unchanged.

“In a sign of the times, its five-year fixed rate has been left at a relatively high 2.50% (2.81% comparison rate), a full 0.51 percentage points higher than the new three-year rate,” Mr Mickenbecker said.

Canstar has noticed a trend of lenders having higher longer-term fixed rates in recent months, as banks come towards the end of cheap funding available from the Reserve Bank under its Term Funding Facility.

While that is occurring, there are still 193 home loans on Canstar’s database at the time of writing with an interest rate under 2%. The large majority of these are fixed, with several two-year fixed loans in particular.