Westpac bank announced this afternoon that it was cutting variable home loan rates by 0.15 percentage points, effective on 16 October, 2019:
- Owner-occupier, principal and interest variable home loan: Rate reduced by 0.15 percentage points to 4.83% p.a. for customers with principal and interest repayments (comparison rate to be advised by Westpac).
- Investor, principal and interest variable home loan: Rate reduced by 0.15 percentage points to 5.38% (comparison rate to be advised by Westpac).
- Owner-occupier, interest-only variable home loan: Rate reduced by 0.15 percentage points to 5.42% (comparison rate to be advised by Westpac).
- Investor, interest-only variable home loan: Rate reduced by 0.15 percentage points to 5.64% for customers with interest only repayments (comparison rate to be advised by Westpac).
How much can I save on my Westpac home loan after the cash rate cut?
Westpac’s Consumer Chief Executive David Lindberg said the cuts would bring the bank’s standard variable rate “to the lowest we have on record for owner occupiers with principal and interest repayments.”
“In making the decision, we took into account the reduction of the official cash rate and the commercial pressures of the low interest rate environment,” he said.
“For an owner occupier customer with a standard variable home loan of $400,000 on principal and interest repayments, this reduction could result in a saving of $36 per month, or $432 each year.
“Today’s announcement will assist customers wanting to get ahead on home loan repayments, as well as new home buyers looking to purchase a property.”
Commonwealth Bank was the first of the majors to announce a move, dropping its standard variable rate for owner-occupiers paying principal and interest (P&I) by 0.13 percentage points and its interest-only rate for investors by 0.25 percentage points. Soon after, National Australia Bank cut some of its variable home loan products by 0.15 percentage points, and investor-only loans by 0.3 percentage points. Today, ANZ reduced variable interest home loan rates by between 0.14 and 0.25 percentage points. The bank also cut some fixed rate home loan products, too.
Will other 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.
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, with variable loans falling by an average of 0.45 percentage points and fixed loans by 0.51 percentage points (at the time of writing), 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.
LEARN MORE: Acting on this week’s rate cut: Options for homeowners and savers