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CBA, NAB, Westpac & ANZ: Banks ‘race’ toward home loan rates below 2%
29 June 2020
It’s no longer a matter of ‘if’ home loan rates will drop below 2%, but ‘when’: that’s one finance expert’s prediction, after news that a big-four bank had cut its rates to match its closest rival. We take a look at the lowest major bank home loan rates on Canstar’s database right now.
National Australia Bank cut between 0.1 and 0.15 percentage points off a number of its home loans on 18 June, including slashing its owner-occupier Base Variable Rate Principal and Interest Special Offer to 2.69% (comparison rate 2.69%). The new rate makes it an equal winner in the ‘lowest variable rate’ race between the big four banks at the time of writing, matching Westpac’s lowest variable offering (2.69%, comparison rate 2.70%). (See the table below for all of NAB’s most recent changes, as well as a table on the lowest big four rates on Canstar’s database.)
However, it could be home owners who are the real winners. Canstar finance expert Steve Mickenbecker said this “can only mean happy days” for borrowers who manage to come through COVID-19 financially intact. While the big four banks’ rates are trending down – NAB’s variable base rate is the lowest the bank has offered to date – non-bank lender Reduce Home Loans has the lowest variable rate on record on Canstar’s database of more than 4,000 home loans. HSBC has the lowest overall rate on Canstar’s database (2.09%, comparison rate 2.98%) for their 2-year Residential Fixed Principal and Interest loan (LVR 80%).
“It is starting to look like ‘when’ rates breach the 2% mark, no longer ‘if’ they will,” Mr Mickenbecker said.
“If variable rates were to reach as low as 1.99%, the possible savings on a $400,000 variable rate loan at the current average owner-occupier rate (on Canstar’s database) of 3.47% could be just over $300 a month, or over $3,700 a year.”
→ Learn more: Freedom Lend cuts to record low
Mr Mickenbecker said lenders were able to keep cutting home loan rates because of “record low wholesale funding rates” – which meant it was cheaper than ever for them to find the money they needed to run their business and also make loans to their customers. This is due, in part, to a record-low official cash rate that is not expected to change for some time, according to the Reserve Bank of Australia (RBA) Governor Philip Lowe, and RBA’s “quantitative easing” measures.
The minutes of the latest RBA board meeting (June, 2020) indicated that because of the low-rate environment, there were many people looking for a better deal on their home loans. This was despite the slowdown in the economy – including the property market – due to the COVID-19 crisis.
“The refinancing of loans remained high (in April) as borrowers sought to take advantage of competition among lenders for borrowers with low credit risk,” the minutes stated.
Mr Mickenbecker said it was interesting to see how the high numbers of people looking to refinance was impacting the home loan market.
“NAB’s 0.10 percentage point cuts to a range of principal and interest one and two-year fixed rates confirms fixed-rate lending continues as most banks’ instrument of choice, as they jockey for share of booming refinance demand in an otherwise flat lending market,” he said.
What are the lowest home loan rates on offer from the big four banks?
Lowest Variable & Fixed Rate Home Loans From the Major Banks ($400k, owner-occupier loans at any LVR) |
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|
Lender |
Product | Rate | Comparison Rate* | |
|
Variable |
||||
| NAB | Base Variable Rate P&I Special Offer <80% | 2.69% | 2.69% | |
| Westpac | Flexi First Option P&I 70% Special Offer | 2.69% | 2.70% | |
| ANZ | Simplicity Plus P&I <80% Special Offer | 2.72% | 2.76% | |
| Commonwealth Bank | Extra P&I 80% | 2.79% | 2.80% | |
|
1 Year Fixed |
||||
| Westpac | Premier Advantage Fixed Options P&I 1 yr 70% 150k+ | 2.19% | 3.52% | |
| Commonwealth Bank | Wealth Package Residential Fixed P&I 1 yr 150k+ 95% | 2.29% | 4.13% | |
| NAB | Choice Package Tailored Fixed – P&I 1 yr 150k+ 95% | 2.29% | 4.17% | |
| ANZ | Breakfree Residential Fixed 1 yr 150k+ 90% | 2.39% | 4.16% | |
|
2 Year Fixed |
||||
| Westpac | Premier Advantage Fixed Options P&I 2 yrs 70% 150k+ | 2.19% | 3.43% | |
| NAB | Choice Package Tailored Fixed – P&I 2 yrs 150k+ 95% | 2.19% | 4.02% | |
| Commonwealth Bank | Wealth Package Residential Fixed P&I 2 yrs 150k+ 95% | 2.29% | 3.99% | |
| ANZ | Breakfree Residential Fixed 2 yrs 150k+ 90% | 2.29% | 4.02% | |
| Source: www.canstar.com.au – 29/06/2020. Based on owner-occupier home loans available for a loan amount of $400,000 and principal & interest repayments; excluding introductory and first home buyer-only loans. *Comparison Rate calculated based on a loan amount of $150,000 repaid over 25 years. Read the Comparison Rate Warning. Table sorted in ascending order by rate, followed by comparison rate. | ||||
NAB Interest Rate Changes – Effective 18/06/2020 |
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| Owner Occupiers | ||||
| Product | Old Rate | New Rate | Comparison rate | Change |
| Base Variable Rate P&I Special Offer <80% | 2.84% | 2.69% | 2.69% | -0.15% |
| Tailored Fixed P&I 1 yr | 2.49% | 2.39% | 4.45% | -0.10% |
| Tailored Fixed P&I 2 yrs | 2.39% | 2.29% | 4.25% | -0.10% |
| Choice Package Tailored Fixed P&I 1 yr 150k+ | 2.39% | 2.29% | 4.17% | -0.10% |
| Choice Package Tailored Fixed P&I 2 yrs 150k+ | 2.29% | 2.19% | 4.02% | -0.10% |
| Investors | ||||
| Product | Old Rate | New Rate | Comparison rate | Change |
| Investment Tailored Fixed P&I 1 yr | 2.79% | 2.69% | 5.02% | -0.10% |
| Investment Tailored Fixed P&I 2 yrs | 2.69% | 2.59% | 4.78% | -0.10% |
| Investment Choice Package Tailored Fixed P&I 1 yr 150k+ | 2.69% | 2.59% | 4.73% | -0.10% |
| Investment Choice Package Tailored Fixed P&I 2 yrs 150k+ | 2.59% | 2.49% | 4.55% | -0.10% |
Source: National Australia Bank/Canstar.com.au
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