Westpac introduces cheaper variable rate for a limited time, and hikes fixed rates

Westpac is offering a cheaper introductory rate on one of its variable loans to new customers for a limited time, becoming the only major bank to offer variable rates starting with a ‘1’. But the bank is also increasing some fixed interest rates.

Westpac cut the introductory rate on one of its variable home loans by 0.20 percentage points on Tuesday, taking the rate on its Flexi First Option Home Loan down to 1.99% (comparison rate 2.42%) for owner-occupiers paying principal and interest with a loan-to-value ratio (LVR) of 70% or less. Customers with an LVR of 80% would pay 2.09% (2.52% comparison rate).

The new introductory rate is only available for two years and only to new customers. Being a variable rate and not a fixed rate means the interest rate could change at any time. After the two-year period, it reverts to 2.49%, and the 80% LVR rate reverts to 2.99%.

The bank’s variable rate of 1.99% (comparison rate 2.42%) undercuts its big bank competitors’ lowest variable rates on our database by a considerable 0.70 percentage points and more, as the other large banks have used their two- and three-year fixed rates to lead their charge in the market.

The cheapest variable home loan rate for homeowners on Canstar’s database is currently Reduce Home Loans’ Super Saver Variable loan at 1.77% (1.86% comparison rate), which is available to borrowers with a 60% or lower LVR.

Westpac also increased four- and five-year fixed home loan rates by 0.30 percentage points for owner-occupiers and investors on Tuesday.

The new rates for owner-occupiers on Westpac’s Premier Advantage Package paying principal and interest with 80% LVR are 2.59% for a four-year fixed loan (comparison rate 3.48%) and 2.89% for a five-year fixed loan (comparison rate 3.54%). The rates are 3.09% (3.99% comparison rate) and 3.09% (3.94% comparison rate) respectively on the same terms for investment loans.

The major banks’ subsidiaries – St.George, Bank of Melbourne and BankSA – are also changing interest rates on some fixed rate home loans today, cutting two-year fixed rates by 0.10 percentage points for owner-occupiers and hiking four and five-year rates for homeowners and investors by 0.30 percentage points.

Looking at the rest of the market, Canstar’s database shows there are even cheaper interest rates to be found from a range of smaller and challenger banks.

Cheapest home loan rates on Canstar’s database, by term

• Variable: 1.77% (1.86% comparison rate), Reduce Home Loans’ Super Saver Variable loan, maximum LVR 60%
• One-year fixed: 1.69% (2.34% comparison rate), Greater Bank’s Great Rate Discount Fixed loan, maximum LVR 90%
• Two-year fixed: 1.79% (2.12% comparison rate), Homestar Finance’s Star Fixed P&I 2 yrs loan, maximum LVR 80%
• Three-year fixed: 1.85% (2.47% comparison rate), 86 400’s Own Home Loan Fixed P&I 3 yrs loan, maximum LVR 80%
• Four-year fixed: 2.14% (2.85% comparison rate), Teachers Mutual Bank’s Freedom Fixed P&I 5 yrs, maximum LVR 60%
• Five-year fixed: 2.27% (2.05% comparison rate), Freedom Lend’s Freedom Fixed PI 5 yrs, maximum LVR 70%.

Source: www.canstar.com.au – 24/08/2021. Based on owner-occupier loans on Canstar’s database available for a loan amount of $500,000, at any LVR with principal & interest repayments; excludes first home buyer-only loans. Comparison rate calculated based on a loan amount of $150,000 and loan term of 25 years. Read the Comparison Rate Warning. Top rates selected based on lowest rate, followed by comparison rate. *Teachers Mutual Bank loan also available from Health Professionals Bank, Firefighters Mutual Bank and UniBank.