ING moved early, announcing a decrease in its fixed home loan rates on Monday – the day before the Reserve Bank of Australia (RBA) board met to decide if the cash rate would be lowered. The changes came into effect on 1 October, hours before the RBA met.
The bank lowered rates on some products by 0.75 percentage points, which is more than the amount the cash rate was lowered (0.25 percentage points).
Today, a week on from the cash rate cut, ING announced further rate reductions of between 0.15 and 0.20 percentage points will be introduced, meaning some of its two and three-year fixed loans will have rates below 3%.
ING’s lowest fixed rates for new and existing owner-occupier customers paying principal and interest will be as follows, effective from Wednesday, 9 October:
- 2.89% (comparison rate 4.23%): Two-year fixed rate, where a customer holds an Orange Advantage home loan.
- 2.94% (comparison rate 4.12%): Three-year fixed rate, where a customer holds an Orange Advantage home loan.
- 2.99% (comparison rate 4.25%): Two-year fixed rate.
- 3.04% (comparison rate 4.14%): Three-year fixed rate.
ING will also lower its variable home loan interest rates for new and existing customers by 0.15 percentage points from 16 October.
Which banks will pass on the full cash rate cut?
After the cut, Australian Treasurer Josh Frydenberg said it was “the Government’s expectation that the banks will pass on this 25 basis point rate cut in full”.
“What this means for an Australian family with a mortgage of $400,000 is $720 less a year in interest payments,” Mr Frydenberg said. “That’s a significant benefit to an Australian family.”
Financial institutions look to the cash rate as a guide to setting interest rates on a range of products including home loans and savings accounts, meaning a change to the cash rate by the RBA typically sets off a chain reaction across the banking sector. October’s decision proved to be no exception, as it was soon followed by a flurry of public announcements about home loan interest rate reductions.
It was smaller lenders who were the first cabs off the rank, with Athena and Homestar announcing they would pass on the full cash rate cut to their customers. Our database shows that other lenders such as Reduce Home Loans, Endeavour Mutual Bank and Freedom Lend have also lowered interest rates since the cash rate cut.
Commonwealth Bank was the first of the majors to announce a move on cash rate day, dropping its standard variable rate for owner-occupiers paying principal and interest (P&I) by 0.13 percentage points. Soon after, National Australia Bank cut some of its variable home loan products by 0.15 percentage points for owner occupiers, and up to 0.30 percentage points for investors. Westpac reduced its rates by 0.15 percentage points, effective 16 October, 2019. ANZ announced it would “decrease all variable interest home loan rates in Australia by between 0.14% and 0.25%”, effective 11 October, 2019. The bank also cut some fixed rate loans, effective 3 October.
In the months since the RBA cut the cash rate in June this year – for the first time in three years – Canstar has noticed a slew of lenders react by lowering variable home loan rates. Fixed rates have also dropped significantly, thanks in part to the lower price banks have been paying for longer-term funding.
There have been more than 1,700 mortgage rate cuts since that first cash rate cut on 4 June, according to Canstar’s home loan database.
Canstar finance expert Steve Mickenbecker said he expected most banks wouldn’t pass on yesterday’s full 0.25 percentage point cut.
“With their profit margins under pressure from low rates, the cut is likely to be between 0.15% and 0.20% for borrowers,” he said.
Mr Mickenbecker said it was a wise idea to shop around for the best deal on home loans – as well as savings products, many of which had suffered a cut to their interest rates in tandem with the cash rate reductions.