ANZ cuts variable mortgage rates for new borrowers, undercutting fellow majors

ANZ now has the cheapest variable package rates out of the big four banks, after cutting some mortgage rates today. But the majors are still well behind the cheapest offerings available from several smaller lenders on Canstar’s database whose variable interest rates start with a ‘1’.
ANZ variable cuts April 2021
ANZ has cut some variable rate home loans, the first of the majors to do so this year. Image source: Vitalii Tairov.

It’s been a while since we saw a major bank cut variable home loan rates for homeowners, with the last variable fall coming from Commonwealth Bank in September 2020. Since then, Canstar’s data shows fixed rate cuts have been the focus for the big four and most other lenders, until today.

ANZ changed its package rate discount structure on Monday to effectively cut some variable package home loan rates by up to 0.90 percentage points for homeowners and investors, but existing borrowers will miss out.

The bank’s new rate on its Breakfree Standard Variable loan is 2.99% (3.42% comparison rate) for owner-occupiers paying principal and interest with a loan-to-value ratio (LVR) of up to 80%.

Canstar finance expert Steve Mickenbecker said ANZ was offering these rate cuts to new borrowers by increasing the package discount it applied to its standard variable rate, and the cuts would not be passed onto existing borrowers.

“ANZ now offers the lowest package rate among the major banks and it would not be surprising to see others moving down the same path,” Mr Mickenbecker said.

A vast majority of home loans issued by ANZ and the other majors are package loans rather than standard loans, meaning they come bundled with other products like a credit card or transaction account.

Canstar’s analysis shows Westpac’s best package rate for owner-occupiers follows behind ANZ’s in second place among the majors at 3.19% (3.60% comparison rate). National Australia Bank’s is in third at 3.67% (4.08% comparison rate) and Commonwealth Bank’s is at 3.85% (4.27% comparison rate), with LVRs ranging from 70%-95%. All the majors’ cheapest package rates also come with an annual fee of $395 attached.

When it comes to standard variable rate home loans that aren’t packaged with other products, Westpac has the cheapest out of the majors at 2.19% (2.62% comparison rate) for LVRs up to 70% on its Flexi First Option loan, which reverts to a higher rate after a two-year introductory special. NAB, Commonwealth Bank and ANZ follow, all offering rates staring with a ‘2’.

If you’re in the market for a standard home loan with a variable rate, Canstar’s database shows there are several loans available from smaller lenders with rates starting with a ‘1’. Here are some of the cheapest:

  1. 1.77% from Reduce Home Loans: Super Saver Variable loan, up to 60% LVR, 1.86% comparison rate
  2. 1.79% from Homestar Finance: Star Gold Home Loan, up to 60% LVR, 1.84% comparison rate
  3. 1.89% from Pacific Mortgage Group: Variable P&I, up to 60% LVR, 1.89% comparison rate
  4. 1.89% from Northern Inland Credit Union: Dream Value Owner Occupied P&I, up to 60% LVR, 2.28% comparison rate
  5. 1.94% from Mortgage House: Lifestyle First Refinancer Special, up to 80% LVR, 2.43% comparison rate.

Source: – 19/04/2021. Based on owner-occupier variable loans available for a loan amount of $500,000, any LVR and principal & interest repayments; including introductory loans. List sorted in ascending order by rate, followed by comparison rate. Comparison rates calculated based on a $150,000 loan amount over a total loan term of 25 years. Read the comparison rate warning

If you’re looking for a fixed rate instead, you might be interested to know the trend of lenders increasing their longer-term fixed rates has continued recently, with Bankwest, Greater Bank, Newcastle Permanent and Northern Inland Credit Union making increases to their four and/or five-year fixed rates last week.

Over the week, one lender on Canstar’s database cut two variable rates by an average of 0.25 percentage points, four lenders cut a total 37 fixed rates by an average of 0.26 percentage points and another four lenders increased 70 fixed rates by an average of 0.21 percentage points.

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