Big 4 banks step up and pass on second cash rate cut

All four major banks, CBA, Westpac, NAB and ANZ, plus dozens of non-major and regional banks, have stepped up to the plate—announcing yesterday afternoon they will pass on the RBA’s 0.25 percentage point cut to variable mortgage customers.

While CBA, NAB and ANZ home loan rate cuts will take effect on 30 May, Westpac’s home loan changes will kick in on 3 June.

← Mobile/tablet users, scroll sideways to view full table →

Source: Canstar. CBA, Westpac and ANZ lowest rates are for their digital-only home loans. Westpac and ANZ’s lowest rates are for refinancers only.

Variable rates under 6% enter the market

With the majority of banks passing on the latest 0.25 percentage point cut to variable borrowers, we estimate:

• Over 30 lenders will offer at least one advertised variable rate under 5.50%

• The lowest variable rate could fall below 5.40%

• The new average existing owner-occupier variable rate will drop to 5.81%
• Around 95% of lenders on the Canstar database will offer a variable rate under 6%.

Which banks have moved so far?

Low-cost lenders, Athena and unloan, were among the first to pass on the full 0.25 percentage point rate cut. Unlike the big banks, these lenders are passing it on immediately to their existing variable customers.

Athena’s new lowest variable rate is 5.74%, while unloan drops to just 5.49% for new customers, effective immediately.

What would the relief look like for those dropping their minimum repayments?

For an owner-occupier with a $600,000 debt today, and 25 years remaining on the loan, today’s cash rate cut could see their minimum monthly repayments drop by $91.

← Mobile/tablet users, scroll sideways to view full table →

Source: Canstar. Notes: based on an owner-occupier paying principal and interest with 25 years remaining in May 2025. Calculations assume banks pass on the cut in full the following month, and that the current rate is 6.06%

How to take advantage of the lower rate

Our data insights director, Sally Tindall says, “Australians with variable home loans can breathe a sigh of relief knowing a second rate cut of the year is here.”

“While two standard RBA cuts seems tiny compared to 13 hikes over the past three years, it’s a welcome step down from a mountain of pressure and a sign the worst of the cost-of-living crisis is in the rearview mirror.

“The big four banks have announced they’ll be passing the cut on in full, which is terrific news. The banks know just how tough it’s been for many of their customers and they’ve made the right decision today.

“However, it’s important to realise that some banks won’t lower your direct debit automatically even if you are paying the minimum, including CBA, NAB and ANZ, so if you do need this extra cash in your bank account, rather than your mortgage, make sure you let your bank know.

“While for many borrowers this extra cash will go straight to paying the bills, for those who have managed to keep their head above water, today’s RBA decision also represents a golden opportunity.

“If you’ve got a $600,000 loan with 25 years to go, your minimum monthly repayments are likely to fall by around $91. However, if you’ve managed to keep up with higher repayments through the rate hikes, consider keeping them the same.

“If we see a total of four cuts this year, including the ones in February and May, and someone with a $600,000 mortgage with 25 years remaining keeps their monthly repayments exactly the same, they could stand to kick their mortgage to the curb four years early and shave more than $89,000 from the total interest bill, provided they keep up these extra repayments for the remainder of their loan.

“But don’t stop there. Canstar estimates that once lenders pass on this cash rate cut there could be at least 30 lenders offering variable rates under 5.50 per cent. If your new mortgage rate isn’t at this mark as an owner-occupier, it could be time to make the switch.”

Keep up to date with lenders’ rate moves.

Cover image source: Nattakorn_Maneerat/Shutterstock.com