Australia’s mortgage war is heating up ahead the RBA August decision, with 49 lenders now offering at least one variable rate below 6%, up from 38 at the start of June.
As a result, 60% of lenders on Canstar have at least one variable rate starting with a 5.
The increase in lenders with variable rates under 6% comes on the back of an abundance of cuts to new customer rates.
Rate tracking by Canstar shows 31 lenders have cut new customer variable rates since the beginning of June.
Lenders in the sub-6% | |
|---|---|
Lender | Rate |
LCU, Pacific Mortgage Group | 5.69% |
Horizon Bank | 5.74% |
Unity Bank | 5.80% |
Border Bank, Greater Bank, | 5.84% |
BCU Bank, Bendigo Bank, | 5.89% |
Bank of China, P&N Bank, | 5.93% |
loans.com.au, Northern Inland Credit Union, | 5.94% |
Community First Bank, Bank Australia, | 5.95% |
Homestar Finance | 5.98% |
Australian Mutual Bank, Bank First, | 5.99% |
Source: Canstar. Rates based on owner occupier loans. LVR and other requirements apply. Excludes green loans.
Competition in the market strengthens case for refinancing
With almost 50 lenders now offering variable rates below 6%, borrowers who haven’t reviewed their home loan in years could be paying significantly more than they need to.
Canstar estimates an owner-occupier who took out a home loan five years ago and has never renegotiated is likely to still be paying around 6.97%.
For a borrower with a $600,000 balance and 25 years remaining, refinancing to a variable rate below 6% could save at least $10,592 over the next two years, even after allowing for $1,150 in switching costs.
Potential impact from | |||
|---|---|---|---|
Variable rate | Repayments | Cost - next | |
Complacent | 6.97% | $4,229 | $79,315 |
Refinance to a | 5.99% | $3,862 | $68,723 |
Difference | -0.98 | -$367 | -$10,592 |
Source: Canstar. Notes: Calculations are estimates based on an owner-occupier paying principal and interest who took out a loan in August 2021 and today has $600k owing and 25 years remaining. Assumes the person has not renegotiated their rate since. Costs include $1,150 in switch costs, but not ongoing fees. Calculations assume rates change in line with CBA's cash rate forecast.
RBA governor likely to warn further hikes still on the cards
While all four big banks believe the cash rate has now peaked, the RBA is likely to keep borrowers on notice, with the Governor reiterating just two weeks ago that the Board will have “some difficult decisions to make in terms of raising interest rates” if inflation does not come down.
Following tomorrow’s meeting, the RBA Board will meet three more times before the end of the year.
Current big four bank | |||
|---|---|---|---|
August | Next | Forecast | |
CBA | Hold | Down | 2 x 0.25 cuts in |
Westpac | Hold | Down | 3 x 0.25 cuts |
NAB | Hold | Down | 2 x 0.25 cuts |
ANZ | Hold | Down | 2 x 0.25 cuts |
Impact of a 0.25 hike | ||
|---|---|---|
Loan size at | Hike in Aug | Cumulative increase |
$600,000 | +$92 | +$364 |
$800,000 | +$122 | +$485 |
$1 million | +$153 | +$606 |
Source: Canstar. Notes: Based on an owner-occupier paying principal and interest with 25 yrs in Feb 2026 at the RBA avg variable rate. Assumes next rate hike falls in August. Calculations assume banks pass on the hikes the month after. Changes are to minimum repayments.
Borrowers are in a stronger position than they have been in some time
Canstar's Data Insights Director, Sally Tindall, says, “Competition in the home loan market is intensifying with lenders sharpening their rates as they battle it out for a bigger slice of the mortgage pie.”
“So far we’ve seen new customer variable rate cuts from 31 lenders since the start of June, including challenger banks Macquarie and Bendigo. What’s missing in this mortgage war is the big four – at least for now.
“Borrowers are in a stronger position than they have been in some time, with almost 50 lenders on Canstar now offering a variable rate below 6 per cent.
“If you haven’t reviewed your home loan in a few years, check what rate your bank is offering new customers. If it’s lower, use this as the push to ask for a rate review or look for a sharper rate elsewhere.
“While the big four banks now believe the cash rate has peaked, borrowers should not adopt this school of thinking.
“Currently core inflation is stuck at 3.6 per cent and still a long way from target. The RBA isn’t going to declare the battle with inflation won and done at tomorrow’s meeting.
“The best thing borrowers can do is to prepare for another hike by getting themselves their own personalised rate cut.”
