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So who is cutting home loan rates?

The Reserve Bank (RBA) has cut the official cash rate to a low of just 1.50%. So which Australian banks are passing that cut on to their customers?

Courtesy of the RBA cash rate movement, cutting the cash rate to an historic low of 1.50%, mortgage holders are in for some rate relief. The news is not so good for self-funded retirees, of course…

So will your home loan interest rate be affected? Chances are that if you have a variable rate home loan, you will receive at least some reduction courtesy of the RBA – it would be a brave financial institution that didn?t pass on any rate cut at all!

When faced with a (welcome) reduction in mortgage rate though, it helps to know where your financial institution stands in comparison to the others. So as at right now, here is what current minimum, maximum and average variable home loan rates are on our database:

Table: Residential Home Loan Market – Snapshot of the current market (2/08/2016)
Basic Variable Standard Variable Package Variable
Average 4.44% 4.55% 4.38%
Min 3.61% 3.59% 3.79%
Max 5.60% 5.84% 5.35%
Table: Investment Home Loan Market – Snapshot of the current market (2/08/2016)
Basic Variable Standard Variable Package Variable
Average 4.69% 4.81% 4.69%
Min 3.95% 3.79% 3.79%
Max 5.65% 6.03% 6.45%

Source: www.canstar.com.au, the search results do not include all home loan providers, and may not include all features relevant to you.

Compare the rates above to your current home loan.

 

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How the Big 4 are passing on the rate cut

All four of the Big 4 banks have announced their post-RBA decision regarding home loans, as follows.

Commonwealth Bank

Commonwealth Bank

Commonwealth Bank has announced that it is passing on 13 basis points of the 25 basis point rate cut on its standard variable home loan, to new and existing mortgage holders.  Owner occupiers will now receive an advertised rate of 5.22% (comparison rate 5.37%*).

“While the circumstances of each RBA rate decision will always vary, we’ve carefully considered the current environment and the needs of both borrowers and savers,” said Matt Comyn, Group Executive Retail Banking Services.

“Given increased funding costs and capital requirements, today’s announced changes seek to balance the needs of both customers and shareholders,” Mr Comyn said.

For Commbank customers, a 13 basis point reduction makes the following difference top monthly repayments, based on a 25 year loan term.

Loan Amount $500,000 $450,000 $400,000 $350,000 $300,000 $250,000 $200,000
Monthly Difference $38 $35 $31 $27 $23 $19 $15

NABNAB bank Outstanding Value winner

The NAB also announced a cut to all new and existing variable rate home loans by 0.10% per annum, which will be effective from Friday 19 August 2016. This means NAB’s Variable Rate for Home Loans (Standard Variable Rate) will reduce to an advertised rate of 5.25% p.a (comparison rate not yet advised*).

“We have had to strike the right balance between providing customers with competitive mortgage rates and continuing to generate attractive returns for our 584,000 shareholders, while recognising that NAB’s funding costs have been steadily increasing due to a range of factors, including the need to strengthen our balance sheet,” said NAB Chief Operating Officer, Antony Cahill.

For NAB customers, a 10 basis point reduction makes approximately the following difference to monthly repayments, based on a 25 year loan term.

Loan Amount $500,000 $450,000 $400,000 $350,000 $300,000 $250,000 $200,000
Monthly Difference $30 $27 $24 $21 $18 $15 $12

 

ANZ wins 2016 Bank of the Year Property Investor AwardANZ

ANZ has announced that it will pass on 12 basis points of the 25 basis point cash rate cut, reducing the Index Rate on its standard variable rate for owner occupiers to 5.25%.

“Regulatory and funding costs have continued to rise and we need to remain attractive to depositors. We are pleased however that home loan customers can still benefit from these historically low interest rates and that we have maintained a competitive rate for both owner occupiers and investors,” said ANZ Group Executive Australia Fred Ohlsson.

“This was a considered decision that balances the expectations of our home loan customers to keep lending rates as low as possible, while also supporting our savings customers who help fund our lending.”

For ANZ customers, a 12 basis point reduction makes approximately the following difference to monthly repayments, based on a 25 year loan term.

Loan Amount $500,000 $450,000 $400,000 $350,000 $300,000 $250,000 $200,000
Monthly Difference $36 $32 $28 $25 $21 $18 $14

Westpac BankWestpac

Westpac was also quick to announce cuts in home loan rates after the RBA meeting. Westpac has announced that the variable home loan (owner occupier) rate will be reduced by 0.14% to 5.29% per annum for customers with principal and interest repayments, effective 23 August.

George Frazis, Chief Executive of Westpac Consumer Bank, said while home loan rates are at historical lows, today’s decision reflects the complex domestic and international environment banks are facing.

“We take a number of factors into account when making interest rate decisions and, in an environment where the cost of funding and deposits are increasing, we have had to balance higher costs, while keeping rates as low as possible for home owners.

“In this low interest rate environment we have changed how we price interest only home loans compared to principal and interest home loans. As a result, we will now offer lower interest rates to customers who make principal and interest repayments to encourage them to pay down their debt and own their home sooner,” Mr Frazis said.

For Westpac customers, a 14 basis point reduction makes approximately the following difference to monthly repayments, based on a 25 year loan term.

Loan Amount $500,000 $450,000 $400,000 $350,000 $300,000 $250,000 $200,000
Monthly Difference $42 $37 $33 $29 $25 $21 $17

 

How does your home loan stack up to the competition?

 

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