In the wake of the Reserve Bank’s decision to cut the official cash rate to an historic low of just 1.50% a number of lenders have faced criticism for not passing on the full rate cut to borrowers and the Prime Minister has announced that Australia’s major banks will be called to appear at least annually before the House of Representatives Standing Committee on Economics.
Nevertheless it seems that the home loan rate war has started, with Reduce Home Loans living up to its name and slashing its Rate Buster Standard Variable Rate to 3.35% (advertised and comparison rate*) – the lowest rate on CANSTAR’s database.
“Unlike some other banks Reduce Home Loans has passed on the RBA cut in full, as they’ve done on each occasion over the past two years,” said Reduce Home Loans Media and Marketing Manager, Josh Beitz.
“We have cut our Rate Buster Standard Variable Home Loan to 3.35% as well as our Rate Buster 100% Offset Variable Home Loan to 3.44%. Reduce set the pace last year by winning Money Magazine’s ‘Best of Best Cheapest Home Loan’ and we’ll continue to keep the banks honest and help drive interest rates lower.”
What home loan rates have done
Despite the criticism levelled at the Big 4 banks after their respective rate reduction announcements, a number of smaller institutions have followed suit in retaining at least one-third of the official cash rate cut on selected products. At time of writing, Bank of Melbourne, Bank of Qld, Bank of Sydney, Bankwest, ME, Newcastle Permanent, St George Bank and Suncorp have all retained at least 10 basis points of the 25 basis point cut.
Institutions that have passed on the full rate cut on selected products thus far include Bank Australia, Virgin Money, Homestar Finance and Reduce Home Loans.
Monthly home loan repayments
The strong message for borrowers is to compare their options and ensure that the home loan they have chosen is market competitive. Based on a $400,000 home loan over 25 years, borrowers could expect the following approximate monthly repayments at various interest rates.
Source: CANSTAR. Approximate calculation for illustrative purposes only.
CANSTAR is an information provider and in giving you product information CANSTAR is not making any suggestion or recommendation about a particular credit product. If you decided to apply for a home loan, you will deal directly with a financial institution, and not with CANSTAR. Rates and product information should be confirmed with the relevant financial institution. For more information, read our detailed disclosure, important notes and additional information. *Read the Comparison Rate Warning.
* Comparison rates are based on a loan of $150,000 over a term of 25 years. WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as economic cost & cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.