Sigh of relief: new lowest variable rate hits 5.24% as latest rate cuts come into effect

Three of Australia’s biggest banks, CBA, NAB and ANZ have each dropped variable rates today by 0.25 percentage points, following the RBA’s May cash rate decision.

This means, from today, millions of Australians with a variable mortgage will be charged less interest.

Westpac variable home loan customers will not see their rate change until 3 June.

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Source: Canstar. *Westpac rates change 3 June. CBA, Westpac and ANZ lowest rates are digital-only. Westpac and ANZ’s lowest rates are refi only. Additional fees for offset. Rates are for owner-occupiers, LVR conditions apply.

New lowest variable rate hits 5.24%

Horizon Bank has taken the title of the lowest variable rate lender in the market with a first home buyer loan priced at 5.24% (comparison rate 5.24%).

More than 20 lenders have now dropped variable rates on the back of last Tuesday’s cash rate cut, including CBA, NAB, ANZ and their subsidiaries, alongside Macquarie Bank, Suncorp, Greater Bank, Newcastle Permanent and IMB.

Over 50 lenders have made their post-May RBA announcements but are still to pass on the cut, according to our rate tracker. A handful have not yet publicly announced their decision.

Of those lenders that have already made their post-RBA rate announcement, our analysis shows:

• 5.24% is the new current lowest variable rate, excluding introductory rates and green loans

• More than 20 lenders now or will soon offer at least one variable rate under 5.50%

• 5.81% will be the new estimated average variable owner-occupier rate for existing borrowers.

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Source: Canstar. Notes: rates are for an owner-occupier paying principal and interest. Deposit size requirements apply. Excludes eco and intro loans. Some effective dates are up to 16 June.

How much could borrowers save?

Analysis shows for an owner-occupier with a $600,000 debt and 25 years remaining on the loan, their minimum monthly repayments could drop by an estimated $91 as a result of the RBA’s May cash rate cut.

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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%.

Cuts take effect, but relief still weeks away

For the majority of big bank customers, the cut might come into play today, however, their bank could keep their repayments steady unless they’re asked to lower it.

Even then, a drop in home loan payments will not be immediate. Customers who get their repayments lowered are likely to have to wait until at least late June to see them drop, with many only likely to see the reduction in July, depending on their billing cycle.

Does your bank adjust repayments after a rate cut?

• CBA: No – customer must initiate change in direct debit

• Westpac: Yes – if paying the minimum + have a direct debit set up

• NAB: No – customer must initiate change in direct debit

• ANZ: No – customer may have to initiate change in direct debit

• Macquarie: Yes – if paying the minimum + have a direct debit set up.

Borrowers should not be waiting for their rate cut to make the switch

Rather than solely relying on the RBA to cut rates, borrowers can get themselves a discount by taking matters into their own hands.

Canstar research shows a borrower with a $600,000 loan today and 25 years remaining could potentially save more than $12,000 over the next two years by switching to a competitive rate of 5.50%, even after factoring in estimated switch costs of $1,150.

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Source: Canstar. Notes: calculations are estimates based on an owner occupier paying principal and interest with a $600k debt and 25 years remaining in July 2025. The complacent variable borrower rate assumes the person has not renegotiated their rate since the start of the rate hikes in May 2022. Costs include $1,150 in switch costs (estimated discharge fees, state govt fees and upfront fees) but not ongoing fees. Calculations assume variable rates change in line with CBA’s current cash rate forecast and that banks pass on any RBA cuts in full the following month.

Banks continue to grow their residential mortgage books

The big four banks might not have the most competitive rates, however, they continue to dominate the mortgage market with 74% of all residential mortgages across the banks, according to new APRA data released today.

CBA once again recorded the biggest rise among the big four banks in its residential home loan book in the 12 months to April, increasing by 6.2% to $586 billion.

ANZ came in a close second behind CBA, growing its residential mortgage book by 6.0% year-on-year, excluding the acquisition of Suncorp’s mortgages in that time.

Challenger bank, Macquarie, continues to outperform, increasing its loan book by a staggering 19%, year-on-year, to $138.9 billion in lending. However, at just 6% market share, Australia’s fifth largest lender is still well behind the big four in terms of market share.
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Source: APRA Monthly Authorised Deposit-taking Institution Statistics, December 2024. Includes both owner occupied and investor loans to households for the big four banks and Macquarie. ANZ figures do not include the former Suncorp mortgages.

Rates over 6% are in the rear view

Canstar’s data insights director, Sally Tindall says, “Owner-occupiers paying principal and interest should no longer be paying a rate of 6 per cent or more – those days are now behind us.”

“In fact, those homeowners who have made decent headway into their debt should really be setting themselves a target of sub-5.50 per cent.

“Horizon Bank has outdone its competitors, offering a new record low variable rate of 5.24 per cent, however, this loan is only for first home buyers with at least 30 per cent deposit, which in this environment is a big ask.

“That said, low-cost lenders are lining up right behind the market leader with offers well below 5.50 per cent giving owner-occupiers, in particular, a pretty impressive array of choice, however, borrowers will have to extend their horizons beyond the big four.

“CBA, NAB and ANZ variable rate customers might be charged less interest from today, however, they still have an important decision to make. These three banks do not automatically lower a customer’s minimum monthly repayments, even when they’re on a direct debit, so if that’s you, have a think about whether you want that relief to land in your bank account or stay in your mortgage.

“If you don’t need the cash right now to make ends meet, think about keeping your repayments exactly the same, because if you can chip in a little bit extra each month, for the rest of your loan term, you could potentially find yourself mortgage-free years ahead of schedule and save tens of thousands of dollars.”

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