Big banks begin passing on RBA cut, but brokers urged to look beyond the majors
Variable home loan rates have started to shift downward after the Reserve Bank of Australia’s (RBA) recent cash rate cut, with some of the country’s largest banks passing on the reduction to borrowers.
As of Friday, Commonwealth Bank, NAB and ANZ have each lowered their standard variable rates by 0.25 percentage points, in line with the RBA’s May decision. The change means lower interest charges for millions of Australian mortgage holders. Westpac customers, however, will have to wait until tomorrow (June 3) for their rates to reflect the change.
Horizon Bank has emerged with the lowest advertised variable rate currently available, offering 5.24% on a product designed specifically for first-home buyers who can provide a 30% deposit.
According to Canstar, more than 20 lenders have now adjusted their rates following the RBA’s announcement. These include subsidiaries of the big four banks, Macquarie Bank, Suncorp, Greater Bank, Newcastle Permanent and IMB. However, over 50 lenders are still yet to implement or announce their intended changes.
For borrowers with a $600,000 loan and 25 years remaining, repayments could fall by around $91 per month due to the rate drop. But the reduction in payments may not be immediate. Even if a lender applies the new rate today, many borrowers won’t see the lower repayment amount reflected until late June or even July, depending on billing cycles.
“Owner-occupiers paying principal and interest should no longer be paying a rate of 6% or more – those days are now behind us,” said Sally Tindall (pictured above), data insights director at Canstar. “In fact, those homeowners who have made decent headway into their debt should really be setting themselves a target of sub-5.50%.”
She noted that while Horizon Bank is offering the lowest rate in the market, its eligibility criteria might be restrictive. “That said, low-cost lenders are lining up right behind the market leader with offers well below 5.50% giving owner-occupiers, in particular, a pretty impressive array of choice, however, borrowers will have to extend their horizons beyond the big four.”
Tindall also urged borrowers to consider whether to maintain their current repayments despite the rate drop. “If you don’t need the cash right now to make ends meet, think about keeping your repayments exactly the same, because if you can chip in a little bit extra each month, for the rest of your loan term, you could potentially find yourself mortgage-free years ahead of schedule and save tens of thousands of dollars.”
Meanwhile, new data from the Australian Prudential Regulation Authority (APRA) shows the big four continue to hold 74% of the residential mortgage market.
Commonwealth Bank recorded the strongest growth among them, with a 6.2% increase in its loan book over the 12 months to April, reaching $586 billion. ANZ followed closely with 6% growth, not including its acquisition of Suncorp’s mortgage portfolio.
Macquarie Bank posted the fastest year-on-year expansion of any major lender, growing its residential loan portfolio by 19% to $138.9 billion. Despite this, its market share remains at just 6%, well behind the major banks.
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